Joseph Smith, the monitor for the $25 billion foreclosure settlement with the largest mortgage servicers, made a lot of progress building up his infrastructure in recent months, but overseeing compliance to the new standards is still half a year away.
Smith stepped down from his post as the North Carolina banking commissioner in February to oversee the state attorneys general settlement for alleged foreclosure abuses and mishandled mortgage and title documentation.
The 49 state AGs and federal prosecutors filed the agreement with Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC), Citigroup (C) and Ally Financial in March.
“I left the position of the commissioner of banks with the assumption that the settlement would be filed soon after. As you know, it wasn’t, but candidly, that was a bit of a blessing because it gave me a chance to prepare, which was very beneficial,” Smith said in an interview with HousingWire Tuesday.
Smith hired his second full-time staffer, who should begin next week. The banks will fund his $3.75 million interim budget for the period ending June 30, and he will submit a longer-term budget in July.
Since taking the spot, Smith set up a nonprofit corporation to handle administrative duties for the monitoring office. He also retained a few law firms and two accounting firms to prep him. He expects to hire more workers soon, but most of the work in monitoring the settlement will be done by a small staff retained from accounting, auditing and forensics companies.
Smith sent out a request for qualifications to nearly 40 firms, from which he will select one to primarily handle the approval of servicer working plans under the settlement.
“I expect to have a primary professional firm chosen by the end of May, and we’ll finalize final work plans for each of the banks in accordance with the schedule, which will have to be done by Independence Day, July 4,” Smith said.
Along with relief to be provided, the servicers must set up internal teams to monitor their compliance with a set of new standards. The rules govern how the servicers handle everything from signing affidavits to short sales. A certain percentage of loans must meet these standards, otherwise the servicer could face future fines if corrections aren’t made.
Smith’s office will conduct quarterly reviews of the findings, but it will still be a full six months before the phase-in process is complete.
“Monitoring the impact of the plans starts at the end of the six months,” Smith said. “We’ll see some pretty some pretty good response soon after that, but we’ll see.”
Smith met with three of the five servicers so far and will meet with a fourth this week. A meeting with the fifth servicer will take place in May, he said.
“The big piece of infrastructure work plans is what they will do internally to monitor their own performance and what I will do to review their work and what I need to confirm it and to test it,” Smith said.
For an in-depth interview with Smith and what to expect from him as the settlement enforcer, subscribe to HousingWire magazine.
