Four years after the nation's largest mortgage servicers were ordered to clean up their foreclosure processes, many are still falling short of their obligations.
Six banks, including JPMorgan Chase, U.S. Bancorp and Wells Fargo, have not fully complied with consent orders related to the independent foreclosure review that began in 2011, the Office of the Comptroller of the Currency said Wednesday. The servicers were cited for a variety of issues including failing to respond to borrower requests for loan modifications, not making a good-faith effort to prevent foreclosures and not having compliance systems in place to track their progress.
The punishment for these infractions was harsh: Wells Fargo, the largest U.S. lender, and HSBC Holdings, Europe's largest bank, are prohibited from acquiring mortgage servicing rights, entering into new servicing contracts or offshoring servicing activity until the consent orders are terminated. Four banks - JPMorgan in New York, EverBank Financial in Jacksonville, Fla., Santander Holdings, the US unit of Spain's Banco Santander, and U.S. Bancorp, in Minneapolis - must each get approval from the OCC to acquire mortgage servicing rights and enter into new contracts, including outsourcing, sub-servicing or offshoring.
All six banks are restricted from appointing new officers responsible for residential mortgage servicing, and servicing risk management and compliance until the orders are terminated.
Those who have followed the independent foreclosure review process said the OCC is exerting renewed pressure on servicers even though the population of delinquent borrowers is on the decline.
Katherine Porter, a law professor at the University of California at Irvine, who is the California monitor of the separate 2012 national mortgage settlement, said that while servicing has improved dramatically in the past four years, there are still problems.
"The OCC brought a lot of firepower to this in terms of being harsh on penalties because this last chunk of servicing work won't get done unless regulators really push," she said.
Morris Morgan, the OCC's deputy comptroller for large banks, said he expects the banks to comply with the latest consent order "within months, not years." Further delays, he added, could lead to additional enforcement orders.
"The meter is still running relative to those six banks and the nature and severity of the additional action will be based on the length and severity of their
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