Many big banks are under fire from federal regulators for mishandling mortgage practices and signing off on controversial loans. Soon regulators will begin to enforce sanctions against lenders in an effort to stabilize a shaky mortgage industry. See the following article from The Street for more on this.
Federal regulators are preparing to sanction large mortgage servicers for "critical deficiencies and shortcomings" in their foreclosure processes, Comptroller of the Currency John Walsh told Congress on Thursday.
Regulators including the OCC, Federal Reserve and Federal Deposit Insurance Corp. have been examining practices of big banks for several months. High-profile cases of improper home seizures and "robosigning" – in which bank employees improperly signed off on thousands of affidavits without reviewing the underlying information – have also led all 50 state attorneys general to join forces in a separate investigation.
In testimony before the Senate Banking Committee, Walsh said that a comprehensive review of the 14 largest U.S. mortgage servicers’ practices found serious problems all along the foreclosure chain – from documentation errors to the blunders of third-party contractors that weren’t properly overseen. Walsh said that the nature and severity of problems differed from one servicer to another, but that regulators are prepared to enforce sanctions against many of the banks.
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"The OCC and the other federal banking agencies with relevant jurisdiction are in the process of finalizing actions that will incorporate appropriate remedial requirements and sanctions with respect to the servicers within their respective jurisdictions," he said. "We expect that our actions will comprehensively address servicers’ identified deficiencies and will hold servicers to standards that require effective and proactive risk management of servicing operations, and appropriate remediation for customers who have been financially harmed by defects in servicers’ standards and procedures."
Walsh didn’t cite a figure on how much the foreclosure penalties may cost big banks.
The large U.S. mortgage servicers that participate in the U.S. Treasury Department’s "Making Home Affordable" program include Bank of America (BAC), Wells Fargo (WFC), JPMorgan Chase (JPM), GMAC (also known as Ally Financial), Citigroup (C), PNC (PNC), U.S. Bancorp (USB), OneWest and the mortgage-servicing arms of Morgan Stanley (MS) and Goldman Sachs (GS), known as Saxon Mortgage Services and Litton Loan Servicing.
This article has been republished from The Street. You can also view this article at The Street, a site covering financial news, commentary, analysis, ratings, business and investment content.
