By Aruna Viswanatha
WASHINGTON — Top U.S. banks including Bank of America and Citigroup failed to fully comply with a government settlement to correct mortgage servicing abuses, a monitor of the settlement said Wednesday.
Bank of America failed to file accurate documents in bankruptcy proceedings, and Citigroup’s mortgage unit failed to notify borrowers about missing documents within 30 days of a request for a short sale, the monitor, Joseph Smith Jr., said.
The two banks have submitted plans to fix those problems and are in the process of correcting earlier failures, he said.
The problems stem from a $25 billion deal between federal and state authorities and five top mortgage servicers in 2012 designed to end foreclosure abuses.
Under the settlement, Bank of America (BAC), Citigroup (C), JPMorgan Chase (JPM), Wells Fargo (WFC) and Residential Capital were required to improve their procedures for dealing with struggling borrowers. They were also required to submit to dozens of tests to measure their improvement.
In a statement, Bank of America said it has “worked diligently” to comply with the terms of the settlement and to ensure struggling borrowers know they are being treated fairly.
The problems with the bankruptcy filings were limited to one quarter and impacted a “relatively small population,” the bank said.
It also said none of the problems resulted in inaccurate foreclosures or improper denials of requests to modify loans.
One bank, Wells Fargo, didn’t fail any tests this year, according to Smith’s report.
Smith said in a statement that while the banks still have additional work to do, he was hopeful the fixes would improve how borrowers are treated.
JPMorgan failed in some instances in 2013 to make decisions on borrower applications to modify loans within a timetable required, and it failed a test that measures whether loans were delinquent at the time a foreclosure was initiated, according to the report.
But Smith said those problems were not widespread at the bank and that JPMorgan had fixed the problems and compensated harmed borrowers.
A JPMorgan representative said in a statement, “We proactively addressed the monitor’s findings and are pleased that he determined that our corrective action plan is complete.”
In October, Bank of America and Wells Fargo pledged to improve communications with borrowers seeking to modify their loans, after authorities found additional problems not covered by the 2012 deal.
One state, New York, accused Wells Fargo in federal court of breaching the terms of the $25 billion deal and said the bank did not go far enough in its commitments. That dispute is pending.
Swiss bank UBS blames a rogue trader at its London office for a $2.3 billion loss that is Britain’s biggest-ever fraud at a bank. Kweku Adoboli, the 32 year old trader, is sentenced to seven years in prison. Britain’s financial regulator fines UBS after finding its internal controls were inadequate and allowed Adoboli, a relatively inexperienced trader, to make vast and risky bets.
The case has echoes of Societe Generale trader Jerome Kerviel, who hid €5 billion in losses. Kerviel said SocGen turned a blind eye to his colossal positions in late 2007 and early 2008 as long as they made money for the bank.
Wells Fargo Bank agrees to pay at least $175 million to settle U.S. Department of Justice accusations that it discriminated against qualified African-American and Hispanic borrowers from 2004 through 2009. The department said the bank’s discriminatory lending practices resulted in more than 34,000 African-American and Hispanic borrowers in 36 states and the District of Columbia paying higher rates for loans solely because of the color of their skin.
JPMorgan Chase announces a loss of $2 billion from a trade that was meant to protect the bank if the global economy sharply deteriorated. Later, losses from the bad trade swell to nearly $6 billion and shave much more from the company’s stock market value. The episode heightens concerns that the biggest banks still pose risks to the U.S. financial system, less than four years after the financial crisis.
Barclays agrees to pay more than $450 million to U.S. and British regulators to settle charges that it attempted to manipulate a global benchmark interest rate known as LIBOR. The rate indirectly affect the costs of hundreds of trillions of dollars in loans that people pay when they get loans to go to college, purchase a car or buy a house. Numerous other banks are under investigation for similar violations.
UBS pays $1.5 billion to settle LIBOR manipulation charges with regulators in the U.S., Britain and Switzerland. The bank says some of its employees tried to rig LIBOR in several currencies.
An independent review finds Kabul Bank spirited some $861 million out of war-torn Afghanistan in a massive fraud based on fake loans to 19 individuals and companies. A bailout of the bank costs the equivalent of 5 percent of Afghanistan’s gross domestic product, making it one of world’s largest banking failures ever.
HSBC, Europe’s largest bank, says it’s paying $1.9 billion in penalties to settle a U.S. money laundering probe. The investigation into HSBC focused on the transfer of billions of dollars on behalf of nations such as Iran and the transfer of money from Mexican drug cartels. The bank said its anti-laundering measures were inadequate and said it was “profoundly sorry.”