Yesterday, Morgan Stanley finally finished selling off its one remaining unit involved in servicing subprime mortgages. Today, the Federal Reserve gave Morgan Stanley some unwelcome news: It must review thousands of foreclosures processed by that now-former subsidiary.
Saxon Mortgage Services was only the 34th largest servicer in the country, but it still managed to foreclose on more than 60,000 homes — more than a quarter of all the home loans it serviced — in 2009 and 2010.
But as you’ve probably guessed by now, it looks like not all of those foreclosures may have been done in a by-the-book manner.
Among the allegations made by the Fed against Saxon are claims that employees filed foreclosure documents without verifying their contents and that they filed mortgage documents with courts that were not properly notarized.
According to the Fed statement, the reviews are meant to “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.”
Even before selling off Saxon, Morgan Stanley had agreed to pay any civil financial penalties assessed against the subprime servicing unit.