I have filed a set of two compliance reports with the United States District Court for the District of Columbia as Monitor of the National Mortgage Settlement (NMS or Settlement). These reports detail my review of HSBC and SunTrust’s performance on the Settlement’s servicing standards. This report is a summary and includes:

• An overview of the process through which my team and I reviewed the servicers’ work.
• Summaries of each servicer’s performance for the first and second the second quarter 2016.
• Updates on the corrective steps servicers have taken to address failed metrics.

This is my first report on HSBC’s compliance with the NMS. HSBC entered into a consent judgment in March 2016 requiring the company to provide $370 million in consumer relief and comply with the NMS servicing standards.

I have concluded that HSBC did not fail any metrics for the first and second quarters 2016. SunTrust failed one metric, Metric 8.

Sincerely,

Joseph A. Smith, Jr.

As required by the Settlement, I filed compliance reports with the United States District Court for the District of Columbia (the Court) for two servicers subject to the Settlement: HSBC and SunTrust.

The reports I filed provide my results from testing compliance with the NMS servicing standards from the first and second quarters 2016. These reports are the first for HSBC and third for SunTrust. Copies of all the reports are available on my website, mortgageoversight.com.

As Monitor, I evaluate the servicers using the 34 metrics, or tests, enumerated in the Settlement. These metrics determine whether the servicers adhere to the 304 servicing standards, or rules, contained in the NMS.

To evaluate the servicers, I work with a team of professionals. Each servicer follows work plans in which an internal review group (IRG) determines whether the servicer complied with the Settlement terms. My professionals and I then review the work of each servicer’s IRG. I determine if the IRG’s work was satisfactory and report my findings to the Court and the public. For more information about the oversight and review process, please see my previous reports.

The NMS defines a failed metric as a potential violation and gives the servicer a chance to fix the root causes of its failure. For more information on what happens when a servicer fails a metric, see the graphic in the Appendix. I also included information on metric fails and corrective action plans (CAPs) in my previous reports.

This report covers the first and second quarters 2016, and I tested each of the servicers on up to 34 metrics.

The work to test the servicers in the first and second quarters 2016 involved 73 professionals, including my primary professional firms, secondary professional firms and other professionals who dedicated approximately 30,410 hours.

Neither HSBC’s IRG nor my professionals found evidence of fails of any of the metrics tested in the first and second quarters 2016.

During the first and second quarters 2016, SunTrust failed one metric in Q1 2016, Metric 8.

Metric 8
This metric tests whether SunTrust properly collected default-related fees from borrowers. Those fees include property preservation fees, valuation fees and attorneys’ fees.

SunTrust submitted its proposed Corrective Action Plan in December 2016. My professionals and I are reviewing it and will determine if the CAP is sufficient to address the root causes of the failure, then SunTrust will implement the CAP before testing resumes.

I will continue to monitor the compliance of HSBC and SunTrust with the NMS Servicing Standards. I will report on my review of the next two test periods to the Court and the public in early 2017.