Mortgage servicers came under the microscope last fall when it was revealed that they were foreclosing on homeowners through faulty affidavits. This started a coordinated investigation by the 50 state attorneys generals along with the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision (OTS), the Federal Reserve, the U.S. Department of the Treasury (DOT), the Department of Housing and Urban Development (HUD) and the Department of Justice (DOJ). However, last week, the Federal Reserve, the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS) entered into settlement agreements, in the form of consent orders, with 14 mortgage servicers involved in the foreclosure fraud, including Ally Financial, Aurora Bank, Bank of America, Citigroup, EverBank, HSBC, JPMorgan Chase, MetLife, OneWest, PNC, Sovereign Bank, SunTrust, U.S. Bancorp and Wells Fargo. This settlement is separate from the state AG settlement being currently negotiated.
Among the expected changes, mortgage servicers must:
- strengthen coordination of communications with borrowers by providing borrowers the name of the person at the servicer who is their primary point of contact;
- ensure that foreclosures are not pursued once a mortgage has been approved for modification, unless repayments under the modified loan are not made;
- establish robust controls and oversight over the activities of third-party vendors that provide to the servicers various residential 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. (according to the Federal Reserve Board press release).
No monetary penalties have been announced yet.
Not many are happy with the federal regulators’ actions. More than two dozen groups have expressed their disagreement in a letter to federal regulators, which states that “the proposed consent orders provide no new directions or standards to the financial institutions subject to [the federal regulators] supervision. Rather, the proposal permits the perpetrators of these abuses to design a plan to comply with existing laws and contracts. This is insufficient to halt the abuses. Specific and protective measures regarding loss mitigation, account management and documentation must be included in any settlement, as well as an appropriate penalty for past illegalities.”
Here are the key documents:
- Federal regulators conducted reviews of the 14 mortgage service servicers which are contained in the report titled Interagency Review of Foreclosure Policies and Practices.
- Consent Order for Ally Financial, Inc., ResCap, GMAC Mortgage, and Ally Bank
- Consent Order for Aurora Bank, FSB
- Consent Orders for Bank of America Corp. and Bank of America
- Consent Orders for Citigroup Inc. and CitiFinancial Credit Co. and for Citibank, N.A.
- Consent Orders for EverBank and EverBank Financial Corp.
- Consent Orders for HSBC North America Holdings, Inc. and HSBC Finance Corp. and for HSBC Bank
- Consent Orders for JPMorgan Chase & Co. and EMC Mtge. and for JPMorgan Chase Bank, N.A.
- Consent Orders for MetLife, Inc., and for MetLife Bank, N.A.
- Consent Orders for OneWest Bank, FSB and IMB HoldCo LLC
- Consent Orders for PNC Financial Svs. Group, Inc. and for PNC Bank, N.A.
- Consent Order for SunTrust Banks, Inc., SunTrust Bank, and SunTrust Mortgage
- Consent Order for Sovereign Bank
- Consent Orders for U.S. Bancorp and for U.S. Bank National Association and U.S. Bank National Association ND
- Consent Orders for Wells Fargo & Co. and for Wells Fargo Bank, N.A.