A long, hard battle
Homeowners have been wronged. Banks have foreclosed on the wrong homes, accelerated foreclosures, and left people homeless without so much as physically reviewing the homeowner documents. They’ve given borrowers the runaround and spurred dozens of lawsuits.
We’ve been covering the government infighting over the investigation of banks mishandling foreclosures and after the Office of the Comptroller of Currency (OCC) split from a tense joint investigation between dozens of federal agencies in conjunction with all 50 state Attorneys General, a final settlement has finally been made public by the OCC.
The OCC split from the AGs claiming action had to be taken immediately and critics claim the infighting has resulted in a much smaller settlement between the banks and damaged homeowners. The OCC announcement notes that the AGs may still take separate actions, but that the OCC is moving forward with their current settlement.
The OCC was joined by the Office of Thrift Supervision (OTS) and the Federal Reserve Board (FRB) to announce their enforcement actions against eight banks and two third party servicer providers for “unsafe and unsound practices related to residential mortgage loan servicing and foreclosure processing.”
The settlement for unsound practices
The eight banks that are settling are Bank of America, Citibank, HSBC, JPMorgan Chase, MetLife Bank, PNC, U.S. Bank, and Wells Fargo. The two service providers are Lender Processing Services Inc. (LPS) and its subsidiaries DocX LLC, and LPD Default Solutions Inc.; and MERSCORP and its wholly owned subsidiary, Mortgage Electronic Registration Systems Inc. (MERS).
The reform requires correction of “deficiencies” found in the investigation.
The settlement based on the OCC’s investigation that found “deficiencies” with the banks calls for a stricter set of rules for handling loan documents, internal investigations, improved procedures for communicating with homeowners and most importantly restitution to some homeowners if evidence supports an erroneous foreclosure.
Critics of the OCC split claim this settlement restricts the ability for homeowners to join together for a class action lawsuit against these eight banks and two servicers.
The OCC Executive Director, John Walsh said, “Our enforcement actions are intended to fix what is broken, identify and compensate borrowers who suffered financial harm, and ensure a fair and orderly mortgage servicing process going forward.”
According to the Federal Reserve Board:
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.
A statement from the FDIC said, “The interagency review was limited to the management of foreclosure practices and procedures, and was not, by its nature, a full scope review of the loan modification or other loss mitigation efforts of these servicers. A thorough regulatory review of loss mitigation efforts is needed to ensure processes are sufficiently robust to prevent wrongful foreclosure actions and to ensure servicers have identified the extent to which individual homeowners have been harmed.”
The Attorneys General have not disbanded and several other federal authorities are continuing their investigation for separate reform and punishments. This battle is far from over and it remains unseen as to whether or not homeowners will win after being beaten down so badly.