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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
California Attorney General Forms Mortgage Fraud Strike Force
California Attorney General Kamala Harris announced the creation of a 25-person task force on Monday charged with protecting homeowners from mortgage fraud.
“Families are losing their homes, while those who perpetrated crimes and frauds against them walk free,” Harris said.
The Mortgage Fraud Strike Force will be staffed by Department of Justice attorneys and investigators and composed of both civil and criminal enforcement teams.
Harris has tasked the group with monitoring and prosecuting violations at every step of the mortgage process, from the origination of mortgage loans to the promotion of fraudulent foreclosure rescue services to the marketing of mortgage-backed securities (MBS) to the investing public.
Los Angeles Mayor Antonio R. Villaraigosa joined Harris at a press conference announcing the initiative and offered his support of the new strike force.
“With nearly 10,000 foreclosures in the city of Los Angeles last year,” he said, “this strike force is certain to help
countless residents and families from becoming victimized.”
“The fingerprints of illegal activity are all over the foreclosure crisis,” said Paul Leonard, director of the Center for Responsible Lending’s California office. “The attorney general’s effort marries the need to punish bad actors for the practices that brought our economy to the brink with the need to eliminate the scam artists who have since attempted to profit from it.”
The attorney general’s office says California has not only been hit hard by the foreclosure crisis, but by predators looking to take advantage of the millions of residents who are underwater on their mortgages, in foreclosure, or at risk of losing their homes.
Last year alone, the attorney general’s office reports there were foreclosure filings against 546,669 California homes, and it is projected that between 2009 and 2012, a total of 2 million California homes will enter the foreclosure process.
Within the last year, the California Department of Justice says it has received thousands of complaints related to foreclosure scams and mortgage servicing practices.
In addition to scams on the default side of the business, the task force will be on the lookout for fraud related to unfair and predatory practices in originating loans, investment and money laundering schemes related to both origination and foreclosure prevention, and misconduct and false claims involving investments and securities tied to subprime mortgages.
The Mortgage Fraud Strike Force will operate out of Department of Justice offices in Los Angeles, Fresno, San Francisco, and Sacramento.
New York AG Looks to Link Financial Crisis and Mortgage Securities
Industry analysts, economists, even lawmakers generally concede that the pooling of risky subprime mortgages into secondary market securities served to fuel the economic collapse that almost brought the nation’s financial system to its knees.
But New York Attorney General Eric Schneiderman is looking for proof that major financial institutions were hocking these dicey mortgage-backed securities during the days leading up to the collapse of the housing market and subsequent financial recession, knowing that these transactions were poorly underwritten and would result in billions of dollars in mortgage losses.
Schneiderman has launched an investigation into mortgage securitization practices during the housing boom, and he’s reportedly summoned executives from Bank of America, Goldman Sachs, and Morgan Stanley for face-to-face meetings at his office in the state’s Capitol and
requested documents from each of them related to mortgage bonds issued prior to the crisis.
Under New York’s Martin Act, the state attorney general can prosecute financial fraud under statutes beyond federal securities laws. Individuals called in for questioning as part of a Martin Act investigation do not have a right to counsel or a right against self-incrimination.
Separately, a New York Court of Appeals has dismissed a suit brought against the financial industry’s three major credit ratings agencies – Fitch Ratings, Moody’s Investors Service, and Standard & Poor’s.
The plaintiffs in the lawsuit, which included several union pension funds as well as other investors who bought some $155 billion in mortgage-backed securities between 2005 and 2007, claimed that the agencies should be held accountable as “underwriters” for assigning the mortgage bonds triple-A ratings when they were backed by high-risk home loans that eventually plummeted in value with a large number defaulting.
The plaintiffs alleged that the credit rating agencies made misstatements and omissions of material information in documents used as part of the securities trading and should be held liable.
But the appellate court upheld three lower-court decisions that the credit ratings agencies did not fit the bill as “underwriters” under federal securities laws because they were not involved in the creation, issuance, or distribution of the mortgage bonds.
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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