News that the National Mortgage Settlement Monitor found holes in big servicers' handling of loan modification timelines and single-point-of-contact requirements sent mortgage bond investors reeling this past week.
Not only are top servicers – including Bank of America, JPMorgan Chase, Citi and Wells Fargo – having trouble meeting certain servicing requirements outlined in a massive $25 billion mortgage settlement, investors are growing increasingly worried the information dripping out is too opaque and confusing.
In the wake of these revelations, investors are continuing their push for more information and clarity about servicing issues. One of their chief concerns is an apparent lack of information on what loan modifications are taking place and for whom.
"We’d like monthly reports on what mortgages are being modified," said Chris Katopsis with the Association of Mortgage Investors. "The settlement was flawed from day one," he added. "We regret that the monitor made no effort to address the concerns of investors."
And just what are investors' concerns at this point?
William Sidford, a former mortgage bond investor who felt the sting of the post-2008 crisis, says investor interests are virtually buried and not part of today’s discussion.
The report from the National Mortgage Monitor, which he finds less detailed than desired, is one such example of where investors feel the marketplace is falling short on providing information to the investment community.
"The things they are required to provide information on are relatively sparse in terms of what we would like to see in terms of reporting," Sidford said of the latest test results released by the national monitor. The monitor was chosen to oversee the compliance of the nation’s big five servicers to ensure they remain in compliance with a series of servicing guidelines.
But what Sidford wants is more detail about what loans have been modified thus far.
"How much of the bank portfolio has actually been modified and what is that relative to the investor book?" Sidford asked. As it stands now, he says, "you don’t know where the modifications came from." And there is no sign investors will gain access to that data, he suggests.
The latest report from the monitor noted compliance issues when dealing with documentation timelines tied to the loan modification process.
But these results are too simplistic for some investors since they only show whether a servicer passed or failed a certain test. For Sidford, that is not enough to provide a definitive conclusion on what is really occurring inside a servicing shop.
"Are these anomalies or is this a pattern of ongoing neglect?" he says. There are going to be problems from time-to-time, he added, but the question is are the acts deliberate and routine — that is something that cannot be easily culled from the limited “pass-fail” data.
For Katopsis, the vague data and servicing failure reports only reconfirm the need to have investors involved in the entire process.
"AMI has testified in front of Congress saying the 20th-century big bank model is broken and doesn’t work," he pointed out. "We call upon regulators and policymakers to find solutions that improve servicing execution."