The New York State Department of Financial Services has entered into agreements with Morgan Stanley and its Saxon Mortgage Services unit, American Home Mortgage Servicing Inc. (AHMSI) and Vericrest Financial requiring the companies to make significant changes to their mortgage servicing practices.
Among other commitments, the servicers have agreed to end robo-signing, withdraw any foreclosure action containing robo-signed or otherwise inaccurate affidavits, and stop the dual-tracking borrowers who are pursuing loss mitigation options.
The agreements mirror those that the department entered into in September with Ocwen Financial, Goldman Sachs and Litton Loan Servicing. Superintendent of Financial Services Benjamin M. Lawsky required the companies to adhere to the servicing practices as a condition to his allowing Ocwen's acquisition of Litton, which closed Sept. 1. Last month, Ocwen announced it had agreed to purchase Saxon from Morgan Stanley.
According to the department, the agreements announced this week neither preclude regulators from investigating the firms' past practices nor release the servicers of any future claims or actions.
"These new reforms are now spreading out into the industry at a time when homeowners truly need relief in the wake of the financial crisis," Lawsky said in a statement. "We will continue to do everything we can to make these reforms the norm in the servicing industry."
The agreements also require Saxon, AHMSI and Vericrest to provide a single point of contact for all borrowers seeking loss mitigation or in foreclosure; compensate or restore property equity for borrowers who have been wrongfully foreclosed; and tighten oversight of foreclosure counsel and other third-party vendors.
The department's statement further says the agreements impose more rigorous pleading requirements in foreclosure actions to ensure that only those parties possessing the legal right to foreclose can sue borrowers, and impose new standards to prevent the layering of fees in ways that compound borrower delinquencies.
Additionally, the servicers must make sure that any force-placed insurance be reasonably priced in relation to claims incurred, and the agreements prohibit force-placing insurance with an affiliated insurer.
"Building on the earlier Ocwen-Goldman agreement, the New York State Department of Financial Services is proving that New York is going to impose tough but fair rules for mortgage servicing," Chuck Bell, programs director of Consumers Union, said in the department's statement. "These agreements create a better, more predictable business environment for both lenders and consumers."
Combined, Saxon, AHMSI and Vericrest service more than 35,500 loans in the state, according to the department.