BLOG VIEW: If the recent string of QC missteps has done nothing else, it's taught banking and servicing executives how to apologize. Take, for example, yesterday's statement from JPMorgan Chase, in which CEO Jamie Dimon had no choice but to admit the bank's wrongful foreclosures on military service members were a ‘painful aberration’ on Chase's track record.
‘We deeply apologize to our military customers and their families for these mistakes,’ Dimon said. ‘We cannot undo them, but we can take accountability for them, fix them and learn from them.’
However, those are merely words. More meaningful will be Chase's delivery of its announced "program enhancements" pertaining to service-member borrowers. The bank, obviously aware of the public-relations hailstorm created by its home loans unit, says it will go above and beyond the protections offered by the Servicemembers Civil Relief Act (SCRA). These steps include reducing rates below the 6% cap required by the SCRA, donating 1,000 homes to military members and veterans, and not foreclosing on any currently deployed service member.
Bigger still, if Chase ever wrongfully forecloses on an SCRA-covered borrower again, the bank will forgive all of the borrower's mortgage debt.
The concessions don't stop there. Chase's attempt to ingratiate itself with the military community extends throughout the enterprise, with Dimon and company making major commitments to provide free technology education to service members. Chase further says it is teaming with other big corporations to hire 100,000 military members and veterans over the next decade. In a related move, the bank will partly base its outsourcing decisions on the strength of vendors' military hiring practices.
As Dimon himself acknowledged in the company statement, these efforts are only "a start." Military personnel are perhaps more deserving of financial protections and special employment consideration than any other segment of the population, and that's when things are going according to plan.
It would be wrong to accuse Chase of being disingenuous or of simply trying to make nice for public-relations reasons. At the same time, it'd be completely naive to ignore the fact that Chase wasn't exactly forthcoming about its mistakes.
A month after the bank stated it overcharged 4,000 active-duty military members and mistakenly foreclosed on 14, a Chase executive informed the rightly upset members of the House Committee on Veterans' Affairs that the numbers were closer to 4,500 overcharged borrowers and 18 bad foreclosures.
"We have identified several operational problems that caused us to mishandle SCRA loans," Stephanie B. Mudick, executive vice president of the bank's office of consumer practices, testified. "Chase's handling of military loans involved significant manual processing and complexity."
This, in turn, led to a combination of human errors and coding mistakes in Chase's system of record. As if it weren't already obvious, weak procedures and controls were a big part of it: Mudick admitted bank employees didn't check the U.S. Defense Department's online data center "with sufficient frequency or consistency."
In short, Chase didn't appear to have a handle on who was SCRA-eligible and who wasn't.
There's no doubt the SCRA can be complex. That was, after all, the gist behind Servicing Management's October 2010 E-Feature, "Clearing The Confusion Surrounding The SCRA," written by attorney and Connecticut Air National Guard Lieutenant Colonel Jeffrey M. Knickerbocker.
But the problems that have come to light at Chase are also clearly representative of servicing QC issues more broadly. Nowhere were these issues more succinctly assessed than at a housing conference last week in a speech by Federal Reserve Board Gov. Sarah Bloom Raskin.
"Servicers need sound policies and procedures that outline the rules, laws, standards and processes by which internal operations are assessed," Raskin said. "Senior executives need to emphasize compliance and qualitative measures over short-run cost efficiency, and need to articulate the presence of adequate quality controls and audit processes to identify risks and take timely, corrective actions where needed."
Coincidentally, Chase's ramped-up SCRA controls were announced days after the company told employees it was reshuffling mortgage-unit management by placing Chief Administrative Officer Frank Bisgnano in charge of Chase Home Lending. I'm not crediting all or any of Chase's service-member-related changes to Bisignano, but the timing of the announcement certainly syncs up nicely with the bank's decision to add serious C-suite power to its mortgage division.
‘Our men and women in the military protect this country and our way of life every day,’ Bisgnano said in yesterday's statement. "They deserve special status and benefits for the privilege they give us to live freely. As part of making this right for our military customers, we will help them to own a home, pay down their debt, get training and find a job. And that's just the beginning.’
As it should be.
– John Clapp, editor, Servicing Management
(Please address all comments regarding this opinion column to clappj@sm-online.com.)
