The Office Comptroller of the Currency has placed restrictions on the mortgage-servicing operations of J.P. Morgan Chase & Co (JPM), Wells Fargo & Co. (WFC), HSBC Holdings PLC (HSBC), Everbank Financial Corp. (EVER), U.S. Bancorp (USB), and Santander Holdings USA Inc. for their failure to totally comply with enforcement orders related to home foreclosure abuses. The OCC said that the banks did not satisfy all the requirements in consent orders that were issued in 2011 over foreclosure processing errors.
Under agreements reached with regulators, most of the biggest mortgage services in the country have consented to pay billions of dollars and fix their controls and systems to resolve claims that they robo-signed, improperly handled loan papers, or fraudulently endorsed affidavits used in foreclosures following the 2008 financial crisis. The banks are accused of improperly putting into motion hundreds of thousands of home foreclosures without assessing each case individually.
The enforcement orders led to scrutiny into US banks’ foreclosure files to assess how many borrowers should be compensated. However, in 2013, the Federal Reserve and the OCC stopped the probe without concluding its investigation.
Regulators had ordered the banks to retain independent consultants to look for wrongdoing and assess past foreclosures. When that ended up proving too expensive and borrowers continued to go unpaid, the regulators agreed to have banks resolve the allegations with loan-assistance program support and payments to borrowers.
The restrictions against the six banks for their failure to fully comply with the enforcement orders include limits placed on:
• The acquisition of residential mortgage servicing rights
• The ability to outsource existing mortgage servicing rights
• New contracts to perform residential mortgage servicing for others
• Offshore new residential mortgage servicing activities
Wells Fargo and HSBC are contending with the toughest restrictions. They cannot grow their mortgage book by buying servicing rights or go into new contracts to perform servicing for other parties. J.P. Morgan Chase, Everbank Financial, Santander Holdings, and U.S. Bancorp are still allowed to take these actions but they need supervisory approval first.
Also, while Wells Fargo and JPMorgan, like the other firms, cannot appoint any new senior mortgage-servicing officers until they meet the order requirements, they can still offer servicing involving new mortgages that they originated or refinanced.
More enforcement actions against the six banks are expected at a later time.
Meantime, the OCC announced that it is lifting the consent orders against the national bank units of PNC Financial Services Corp. (PNC), Citigroup Inc. (C), and Bank of America Corp. (BAC) because they have met the necessary requirements. There will no longer be restrictions placed on their mortgage servicing activities.
OCC plans to end its involvement in the settlement program involving the foreclosure probe later in the year. The program has distributed over $2.7 billion to over 3.2 borrowers from banks. Another $280 million is expected to go unclaimed despite efforts to find the eligible borrowers.
OCC slaps Wells Fargo, JPMorgan, others with mortgage servicing restrictions, HousingWire, June 17, 2015
OCC Slaps Limits on Banks Over Foreclosures, The Wall Street Journal, June 17, 2015