In 2011, the Office of the Comptroller of the Currency (OCC) and Federal Reserve ordered 16 mortgage services to hire independent consultants to review files for homes in any stage of foreclosure, an enforcement known as the Independent Foreclosure Review. The goal was simple: put an end to the forged or sloppy paperwork being used to hastily foreclose on homes, an act better known as robo-signing.
While many of the mandated changes have been undoubtedly met, it would seem that some lenders still haven’t fully complied, as the OCC has recently slapped Wells Fargo, JPMorgan Chase and four other banks with restrictions on each bank’s mortgage servicing operations.
- Acquisition of residential mortgage servicing or residential mortgage servicing rights (does not apply to servicing associated with new originations or refinancings by the banks or contracts for new originations by the banks);
- New contracts for the bank to perform residential mortgage servicing for other parties;
- Outsourcing or sub-servicing of new residential mortgage servicing activities to other parties;
- Off-shoring new residential mortgage servicing activities; and
- New appointments of senior officers responsible for residential mortgage servicing or residential mortgage servicing risk management and compliance.
Wells Fargo and HSBC were dealt the hardest blow and are prohibited from the following:
- Acquiring of mortgage servicing rights until the consent order is terminated
- New contracts to perform mortgage servicing prohibited until the consent order is terminated
- New offshoring of mortgage servicing activity until the consent order is terminated
EverBank, JPMorgan Chase, Santander Bank NA, U.S. Bank National Association will only need prior approval from the OCC on mortgage servicing activity.
Each of the affected banks said that they are working with the OCC on the related matters.
Some lenders are in the clear though – the OCC also announced that Bank of America (BAC) Citigroup (C) and PNC Financial Services Group (PNC) are in compliance with the IFR and will no longer have restrictions on their mortgage-servicing activity.
So far, the IFR Payment Agreement resulted in the distribution of more than $2.7 billion to more than 3.2 million eligible borrowers, representing more than 90% of the total amount available for distribution.
But despite that high cash rate compared to many other payment distributions, the OCC anticipates that approximately $280 million from OCC-supervised institutions will remain unclaimed at the end of the year after considerable efforts to locate eligible borrowers have been exhausted.
Do you believe the failure to comply was an honest mistake, or are these banks still trying to cut corners when it comes to lending and foreclosing? What are your thoughts?
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