The clock is ticking for the biggest U.S. banks to revamp their foreclosure practices.
Under orders from U.S. regulators, 14 financial institutions have until mid-June to lay out plans to clean up their mortgage-servicing operations—and another 60 days to make the changes.
It will be a daunting, expensive chore despite the work done since the foreclosure mess erupted last fall. J.P. Morgan Chase & Co. said it would take a $1.1 billion charge related to the consent order and other servicing-cost increases. Citigroup Inc., which services $602 billion of mortgage loans, predicted the changes will boost expenses by as much as $35 million a year.
"It does raise the bar," said Frederick Cannon, director of research at Keefe, Bruyette & Woods Inc. The overhaul either goes "beyond what was considered best practices for the industry, or [banks] weren't really complying with best practices."
On Thursday, Fannie Mae, Freddie Mac and their federal regulator rolled out new guidelines designed to encourage more successful modifications while preventing foreclosures from dragging on. The rules will require servicers to approach borrowers earlier and more frequently after a first missed payment in order to have a better chance at modifying loans. The mortgage titans also will pay more to servicers that meet certain benchmarks and establish timelines for banks to modify loans or process foreclosures.
Here is a status report on how close some of the largest mortgage servicers are to meeting three important requirements in the regulatory order:
Read on.
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