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OCC Chief Counsel Testifies on Efforts to Correct Foreclosure Deficiencies
TESTIMONY OF JULIE L. WILLIAMS FIRST SENIOR DEPUTY COMPTROLLER AND CHIEF COUNSEL
OFFICE OF THE COMPTROLLER OF THE CURRENCY
Before the
SUBCOMMITTEE ON HOUSING, TRANSPORTATION, AND COMMUNITY
DEVELOPMENT Of the COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS UNITED STATES SENATE
DECEMBER 13, 2011
EXCERPT: “In general, the examinations found the loans in the sample were seriously delinquent.
However, the examinations also found critical deficiencies in foreclosure governance processes,
document preparation processes, and oversight and monitoring of third parties. These
deficiencies constituted unsafe and unsound banking practices, which also resulted in violations
of certain laws, regulations, or rules. All servicers exhibited similar deficiencies, although the
number, nature, and severity of deficiencies varied by service”
10 banking organizations to address misconduct and negligence (repost)
Action Date: April 14, 2011
Location: Washington, DC
The Federal Reserve Board on Wednesday, April 13, 2011, announced formal enforcement actions requiring 10 banking organizations to address a pattern of misconduct and negligence related to deficient practices in residential mortgage loan servicing and foreclosure processing. According to the press release from the Federal Reserve, these deficiencies represent significant and pervasive compliance failures and unsafe and unsound practices at these institutions.
The Board stated that it is taking these actions to ensure that firms under its jurisdiction promptly initiate steps to establish mortgage loan servicing and foreclosure processes that treat customers fairly, are fully compliant with all applicable law, and are safe and sound.
The 10 banking organizations 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 Banks, Inc.; U.S. Bancorp; and Wells Fargo & Company. Collectively, these organizations represent 65 percent of the servicing industry, or nearly $6.8 trillion in mortgage balances. All 10 actions require the parent holding companies to improve holding company oversight of residential mortgage loan servicing and foreclosure processing conducted by bank and nonbank subsidiaries.
In addition, the enforcement actions order the banking organizations that have servicing entities regulated by the Federal Reserve (Ally Financial, SunTrust, and HSBC) to promptly correct the many deficiencies in residential mortgage loan servicing and foreclosure processing. Those deficiencies were identified by examiners during reviews conducted from November 2010 to January 2011.
The Federal Reserve believes monetary sanctions in these cases are appropriate and plans to announce monetary penalties. These monetary penalties will be in addition to the corrective actions that the banking organizations are expected to take pursuant to the enforcement actions.
The enforcement actions complement the actions under consideration by the federal and state regulatory and law enforcement agencies, and do not preclude those agencies from taking additional enforcement action. The Federal Reserve continues to work with other federal and state authorities to resolve these matters.
The actions taken Wednesday require each servicer to take a number of actions, including to make significant revisions to certain residential mortgage loan servicing and foreclosure processing practices. Each servicer must, among other things, submit plans acceptable to the Federal Reserve that:
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.
The Federal Reserve will closely monitor progress at the firms in addressing these matters and will take additional enforcement actions as needed.
In addition to the actions against the banking organizations, the Federal Reserve on Wednesday announced formal enforcement actions against Lender Processing Services, Inc. (LPS), a domestic provider of default-management services and other services related to foreclosures, and against MERSCORP, Inc. (MERS), which provides services related to tracking and registering residential mortgage ownership and servicing, acts as mortgagee of record on behalf of lenders and servicers, and initiates foreclosure actions. These actions address significant compliance failures and unsafe and unsound practices at LPS and its subsidiaries, and at MERS and its subsidiary. The action requires LPS to address deficient practices related primarily to the document execution services that LPS, through its subsidiaries DocX, LLC, and LPS Default Solutions, Inc., provided to servicers in connection with foreclosures. MERS is required to address significant weaknesses in, among other things, oversight, management supervision, and corporate governance. The LPS action is being taken jointly with the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision, while the MERS action is being taken jointly with those agencies and the Federal Housing Finance Agency.
The Federal Reserve Board based its enforcement actions on the findings of the interagency reviews of the major mortgage servicers, LPS, and MERS. A summary of the findings from the reviews of the mortgage servicers is available in the Interagency Review of Foreclosure Policies and Practices, which is simultaneously being released by the Federal Reserve Board and the other agencies.
Source: Fraud Digest
MUST SEE MSNBC Nightly News Fraudclosure Series
No End in Sight to Foreclosure Quagmire
Posted by Foreclosure Fraud on May 11, 2011MSNBC Foreclosure Crisis Reports
You can view/read the main text article for the special report here:
http://www.msnbc.msn.com/id/42881365/ns/business-personal_finance/
Foreclosure Crisis: The Mortgage Loan Modification Trap
http://www.msnbc.msn.com/id/21134540/vp/42938007#42938007
Foreclosure Crisis: The Whistleblowers
http://www.msnbc.msn.com/id/21134540/vp/42938009#42938009
Foreclosure Crisis: Manufactured Loan Documents
http://www.msnbc.msn.com/id/21134540/vp/42938017#42938017
Foreclosure Crisis: The Face of Foreclosure: One Family’s Story
http://www.msnbc.msn.com/id/21134540/vp/42938294#42938294
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Banks float $5 billion deal to settle foreclosure probe: report
(Reuters) – Major banks are willing to pay as much as $5 billion to settle claims by federal and state officials of improper mortgage foreclosure practices, the Wall Street Journal reported, citing people familiar with the situation.
The banks’ offer comes as mortgage companies and state and federal officials continue their efforts to strike a settlement of investigations sparked by allegations of “robo-signing” and other questionable foreclosure practices that came to light last fall, the Journal said.
The banks intend to propose that as much as $5 billion be used to compensate any borrowers previously wronged in the foreclosure process and provide transition assistance for borrowers who are ousted from their homes, the WSJ said, citing people familiar with the matter.
(Reporting by Sakthi Prasad in Bangalore; Editing by Ramya Venugopal)
State AGs Offer New Settlement Terms to Mortgage Servicers
American Banker | Wednesday, May 11, 2011
By Cheyenne Hopkins
WASHINGTON — After months of stalemate, the state attorneys general have proposed new terms to the top five mortgage servicers that drop some controversial provisions of their first attempt at a settlement, including a push to force banks to reduce principal on thousands of mortgages.
The new offer, which was expected to be discussed at a meeting between the two sides on Tuesday, moves them closer to a final agreement, but does not detail how much state AGs are seeking in penalties for servicing issues uncovered by federal and state regulators.
Banks have privately said that they will not agree to a fine above $10 billion — far below a discredited $20 billion figure floated in the press two months ago — arguing that regulators have not provided evidence that servicing problems led to wrongful foreclosures.
The AGs are considering using whatever money they receive from banks to start a “cash for keys” program to help troubled borrowers move out of their homes and speed the foreclosure process by providing them cash incentives to leave. The funds are also expected to be used to promote mortgage counseling and offer some forebearance to troubled homeowners.
While banks have not agreed to the new terms, they do appear much more beneficial than an offer made in February, which demanded sweeping changes across the servicing industry, including principal reductions. By dropping that requirement, banks have already scored a key victory, observers said.
“It makes sense for principal reduction to be off the table because it creates a tremendous number of legal and logistical obstacles that in the context of a complex settlement are obviously difficult and distracting,” said David Dunn, a partner at Hogan Lovells law firm. “It makes sense for that to come off the table for the parties to reach agreement on issues that are less difficult and controversial.”
But the term sheet would still require the servicers to enact substantial changes to their practices, and could potentially raise issues in new areas.
Under the new terms, according to several sources, servicers would be required to allow borrowers that received a trial Treasury Home Affordable Mortgage Program modification — but which were denied a permanent mod — to reapply for the program.
The state AGs are also continuing to insist that servicers stop pursuing loan modifications and foreclosures at the same time, a process known as dual tracking that has drawn complaints from confused consumers.
The revised term sheet raised some new issues, including a proposed requirement for more documentation concerning the basis of knowledge for a foreclosure and notes and assignments. The state AGs are seeking to require documentation on the appropriate transfer and delivery of endorsed notes and deeds of trust at the formation of a mortgage-backed security. Essentially, servicers would have to document that they not only have positions with the MBS but document that the securitization was formed properly.
The new term sheet would also expand protections provided by the Servicemembers Relief Act to prohibit foreclosures on servicemembers who have been permanently moved to a post in a different state.
The new settlement also includes language that servicers must make borrowers aware of loss mitigation options prior to referral to foreclosure and facilitate loss mitigation applications. But the state AGs have dropped a demand that servicers provide to the Consumer Financial Protection Bureau their formulas for calculating the net present value of a home.
It remains unclear if banks are amenable to the proposed new terms. Also unknown is whether the new requirements would be extended to the rest of the servicing industry.
“I don’t know where the banks are with this because they are working on their federal consent orders,” said Lisa DeLessio, a partner at Hudson Cook LP. “I still think it’s very unclear what this means. If the AGs reach a settlement with the banks, what will this mean for the rest of mortgage servicers? What will happen to them?”
Despite the proposed new terms, many observers were pessimistic the two sides will reach a deal anytime soon. Fed up with the delay in the process, the banking regulators already moved forward in April with a cease and desist action against the top 14 mortgage servicers.
The state AGs, meanwhile, have been beset by doubts on their own side after the initial release of their 27-page term sheet. Several Republican AGs said pursuing principal reductions were a mistake, while GOP members on Capitol Hill criticized the CFPB’s involvement in the settlement process.
Some said the process was liable to continue to drag out.
“I do not believe the prospects of a full resolution in the short term are very high as there remain divergent views among all parties,” said Andy Sandler, co-chair of BuckleySandler LLP.
Others said the AGs will not force a settlement until they can provide more details on what exactly the banks did wrong. While the banking regulators released an 18-page report detailing deficiencies at the servicers, the state AGs have not spelled out what issues they uncovered.
“There has to be some more due diligence and investigation before they have the credibility to enforce a settlement,” said Josh Rosner, managing director of the research firm Graham Fisher & Co. “If they did a credible investigation of origination and servicing and detailed the findings of that investigation it would demonstrate how troubled the situation is and how deep the economic morass is.”
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