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40 FINAL SETTLEMENT TEST FINDS SERVICERS TO BE IN FULL COMPLIANCE An independent monitor has concluded his series of reports on four of the mortgage servicers originally included in the 2012 National Mortgage Settlement (NMS) and uncovered no failed metrics in his seventh and final report. Joseph A. Smith Jr., monitor of the NMS, and his team reported in the Original Servicers' Final Compliance Update that four of the original parties in the settlement—Bank of America, Chase, Citi, and Wells Fargo—as well as Ditech, were in complete compliance with the rules of the settlement during the third quarter of 2015, after which the rules of the NMS sunset. e compliance test includes a total of 33 metrics—29 originally set forth by the NMS and four more set forth by the Monitor in 2013—on which the servicers were tested during Q 3 2015. "e settlement has improved the way these servicers treat distressed borrowers," Smith said. "e banks undertook more than 630,000 transactions and provided borrowers with more than $50 billion in consumer relief, and I believe the Settlement contributed towards the rebuilding of public trust and confidence in the mortgage market. I hope that it will inform future regulation of financial institutions and markets." e Original Servicers' Final Compliance Update contains a summary of the reports that Smith and his team filed with the U.S. District Court for the District of Columbia on four of the original parties to the NMS. Ditech became subject to the terms of the NMS agreement when it acquired a portion of the portfolio from another servicer originally included in the settlement, ResCap Parties. e mortgage servicers will remain in accountable to the Consumer Financial Protection Bureau (CFPB)'s mortgage servicing rules, according to Smith. e report released Tuesday does not include the results of compliance tests for Ocwen or SunTrust for Q 3 2015. Smith said their obligations to comply with the NMS servicing standards will continue under their individual settlements, and that he would report results on Ocwen's and SunTrust's performance for the third and fourth quarters of 2015 later this year. In Smith's last update on Ocwen's compliance with the terms of the NMS, released in October 2015, the monitor revealed that the Atlanta-based servicer failed four metrics during the second half of 2014. Smith's first report on SunTrust, which was issued in December, indicated that the Atlanta-based bank (as well as all the other servicers that were party to the settlement except for Ocwen) had no failed metrics during the first half of 2015. e NMS was originally finalized in April 2012 between 49 states and the District of Columbia, the federal government, and five banks and/or mortgage servicers (Bank of America, Citi, JPMorgan Chase, Ally/GMAC, and Wells Fargo). As part of the agreement, the five servicers were required to provide $20 billion in consumer relief and $5 billion in other payments. Ocwen falls under Smith's supervision due to the servicer's acquisition of mortgage servicing rights from a unit of Ally Financial, one of the original banks included in the settlement. SunTrust became party to the NMS in June 2014 when it settled with the DOJ for $968 million to resolve claims that the Atlanta-based bank engaged in improper mortgage origination practices as well as servicing and foreclosure abuses. Ocwen entered into a new consent judgment with the Consumer Financial Protection Bureau (CFPB) in February 2014 that requires the servicer to provide $2.1 billion in consumer relief and to comply with the servicing standards set forth by the NMS. FDIC CLARIFIES RULES FOR BANKS ON ABANDONED FORECLOSURES In a Financial Institution Letter issued on Wednesday, the Federal Deposit Insurance Corporation (FDIC) clarified its supervisory expectations in existing guidance for the risk- management practices when banks make the decision to discontinue foreclosure proceedings, which are commonly known as abandoned foreclosures. e FDIC noted in the letter that when banks stop the foreclosure process after it has already been started, the borrower may have already abandoned or stopped maintaining the property—which can often lead to accumulation of trash, blight, and crime, and have an adverse effect on the surrounding community. "e FDIC continues to encourage institutions to avoid unnecessary foreclosures by working constructively with borrowers and considering prudent workout arrangements that increase the potential for financially stressed borrowers to keep their properties," the letter said. "When workout arrangements are unsuccessful or not economically feasible, existing supervisory guidance reminds institutions of the need to establish policies and procedures for acquiring other real estate that mitigate the impact the foreclosure process has on the value of surrounding properties." When making the decision to discontinue the foreclosure process, institutions should have appropriate policies and procedures in place, according to the FDIC's letter. Institutions should: » Obtain and use the most current market value information on the property and use current valuation and other relevant information when making the decision to initiate, pursue, or abandon the foreclosure process » Implement criteria for determining when their lien(s) should be released due to the financial considerations they may face due to stopping the foreclosure process. In some cases, the institution may face litigation. » Notify appropriate state or local government authorities such as tax authorities, courts, or code enforcement departments of their decision to abandon the foreclosure process, and they must comply with all applicable state and local laws. » Notify the borrower(s) that they will no longer be pursuing foreclosure, whether or not the mortgage holder has released the lien, the borrower has the right to occupy the property until a sale or title transfer occurs, and that the borrower is responsible for the remaining balance on the mortgage loan and for maintaining the property. » Use reasonable means to contact the borrower in order to provide the notice described above, particularly in cases where the borrower vacated the property because the foreclosure process was initiated.

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