The Federal Reserve, Office of Comptroller of the Currency (OCC), FDIC,
and Office of Thrift Supervision (OTC) have issued formal enforcement actions
against 14 banking and two loan servicing related organizations which they found had demonstrated
a “pattern of misconduct and negligence related to deficient practices in
residential mortgage loan servicing and foreclosure processing.” The Fed said that these deficiencies represent
significant and pervasive compliance failures and unsafe and unsound practices.
organizations cited are: Bank of America Corporation; Citigroup Inc.;
Ally Financial Inc.; HSBC North America Holdings, Inc.; JPMorgan Chase
Co.; MetLife, Inc.; The PNC Financial Services Group, Inc.; SunTrust
Inc.; U.S. Bancorp; and Wells Fargo Company, Aurora Bank, EverBank,
OneWest Bank and Sovereign Bank. All 14 were named by FDIC, eight by
by the Federal Reserve and four by OTC.
Three of the organizations, SunTrust, HSBC and Ally Financial, were
singled out by the Federal Reserve and ordered to promptly correct many deficiencies
in loan servicing and foreclosures that were identified by examiners over the
last few months.
Action is also being taken against Lender Processing Services (LPS) and
Mortgage Electronic Registration Systems addressing what the Fed called
significant compliance failures and unsafe and unsound practices at the
companies and their subsidiaries. LPS
will be required to address deficient practices related primarily to the
document execution services it provides to servicers through two subsidiaries,
DocX and LPS Default Solutions. MERS is
required to address significant weaknesses in oversight, management
supervision, and corporate governance.
The action followed an interagency review of the banks by their respective
regulators and FDIC which issued the following statement.
“The findings of the interagency review clearly show that the largest
mortgage servicers had significant deficiencies in numerous aspects of their
foreclosure processing. These deficiencies included the filing of inaccurate
affidavits and other documentation in foreclosure proceedings (so-called
“robo-signing”), inadequate oversight of attorneys and other third
parties involved in the foreclosure process, inadequate staffing and training
of employees, and the failure to effectively coordinate the loan modification
and foreclosure process to ensure effective communications to borrowers seeking
to avoid foreclosures. The interagency review was limited to the management of
foreclosure practices and procedures, and was not, by its nature, a full scope
review of the loan modification or other loss-mitigation efforts of these
servicers. A thorough regulatory review of loss mitigation efforts is needed to
ensure processes are sufficiently robust to prevent wrongful foreclosure
actions and to ensure servicers have identified the extent to which individual
homeowners have been harmed.”
The banking organizations have been order to provide corrective actions
in servicing and foreclosure processes. Among
other things, each must submit plans acceptable to the Federal Reserve that:
Provide borrowers a specific person to be their primary point of
Ensure that the foreclosure process ends once a modification has been
approved and the borrower is performing under that modification.
Establish oversight over third-party vendors of mortgage loan
servicing, loss mitigation, or foreclosure-related support, including local
counsel in foreclosure or bankruptcy proceedings;
Provide remediation to borrowers who suffered financial injury as a
result of wrongful foreclosures or other deficiencies identified in a review of
the foreclosure process; and
Strengthen programs to ensure compliance with state and federal laws
regarding servicing, generally, and foreclosures, in particular.
In addition to ordering corrective action the Fed said it expects to
levy financial penalties on the organizations.
There are other actions under consideration by federal and state
regulatory and law enforcement organizations and the Fed said its actions are
complementary to and do not preclude any actions that may be taken by others. No penalties have been announced yet.
A few of the banks have already responded to the Federal
Reserve action. Ally Financial confirmed
it had entered into a consent order with both the Federal Reserve and the FDIC
as a result of the ongoing investigation into it loan processing procedures. MetLife also confirmed its consent order and
said it has committed to further enhance its oversight of risk management,
audit and compliance programs.