Four Years After Reaching Deal With Regulators, Six Banks Still Haven’t Fixed Foreclosure Problems

Back in 2011, several of the nation’s largest banks entered into a settlement with federal regulators that required the institutions to correct widespread foreclosure abuses that helped to trigger the housing crisis. While the agreement was revised in 2013 to make things a bit easier for the offending banks, regulators today announced that six of the lenders – including JPMorgan Chase and Wells Fargo – still haven’t met requirements and face new restrictions on their mortgage operations.

The Office of the Comptroller of the Currency announced on Wednesday that JPMorgan, Wells Fargo, Santander, HSBC, US Bank and EverBank must abide by revised consent orders that impose limitations on the ways in which the lenders can conduct certain mortgage-related business activities.

The restrictions were handed down after the OCC determined that the banks hadn’t done enough to comply with enforcement orders related to past home foreclosure abuses such as mishandling loan papers, robo-signing legal documents, and improperly initiated foreclosures without reviewing each individual case.

Morris Morgan, the OCC’s deputy comptroller for large banks tells the Wall Street Journal that the regulator expects lenders to meet requirements in “months, not years” and that the office was “not satisfied with where [lenders] are at this at this point in time.”

While the restrictions don’t affect mortgages that the banks issue themselves, they do limit the banks’ ability to acquire residential mortgage servicing or residential mortgage servicing rights from other companies.

Additionally, the lenders are limited in outsourcing or sub-servicing of new residential mortgage servicing activities to other parties and appointing senior officers responsible for residential mortgage servicing or residential mortgage servicing risk management and compliance, the OCC order states.

The OCC says that the banks face varying restrictions based on their particular circumstances, but didn’t elaborate in the announcement.

However, the WSJ reports that HSBC and Wells Fargo encountered the harshest limits, as both are prohibited from increasing the size of their mortgage book though the purchase of servicing rights or entering into new contracts to do servicing for other parties.

JPMorgan, Santander, US Bank and EverBank must obtain approval from the OCC to take such action.

“In all cases, OCC examiners will continue to oversee these institutions’ corrective actions and mortgage servicing activities as part of the agency’s ongoing supervision,” the announcement states.

Not all of the banks that signed on to the 2011 and 2013 agreements have failed in meeting their obligations.

The OCC announced Wednesday it would terminate orders against Bank of America, Citibank and PNC Bank after the lenders complied with their initial orders. Foreclosure-related consent orders against Aurora Bank, FSB, and MetLife Bank, were prevoiusly lifted.

To date, the OCC says it has provided more than $2.7 billion to more than 3.2 million eligible borrowers as a result of agreements with lenders.

Still, the regulator says it was unable to distribute about $280 million and would hand the funds over to states in an attempt to find the affected homeowners.

U.S. Restricts Six Banks Over Mortgage Problems [The Wall Street Journal]
OCC to Escheat Funds from the Foreclosure Review, Terminates Orders Against Three Mortgage Servicers, Imposes Restrictions on Six Others [Office of the Comptroller of the Currency]