The Federal Reserve System, the Office
of the Comptroller of the Currency (OCC), the Federal Deposit
Insurance Corporation (FDIC), and the Office of Thrift Supervision
(OTS), referred to as the agencies, conducted on-site reviews of
foreclosure processing at 14 federally regulated mortgage servicers
during the fourth quarter of 2010.
In order to ensure consistency with the
reviews they conducted, they used divided work programs into the
following categories:
- Policies and procedures;
- Organizational structure and staffing;
- Management of third-party service providers;
- Quality control and internal audits;
- Compliance with applicable laws;
- Loss mitigation;
- Critical documents; and
- Risk Management.
The reviews found critical weaknesses
in servicers' foreclosure governance processes, foreclosure document
preparation processes, and oversight and monitoring of third-party
vendors, including foreclosure attorneys. The servicers included
represent more than two-thirds of the servicing market. These
weaknesses pose a variety of risk to the financial services industry
and investors.
They found the following functions
were not being provided at satisfactory levels:
- ensuring accurate foreclosure documentation, including documentation pertaining to the fees
- assessed;
- incorporating mortgage-servicing activities into the servicers’ loan-level monitoring, testing, and
- validation programs;
- evaluating and testing compliance with applicable laws and regulations, court orders, pooling and
- servicing agreements, and similar contractual arrangements; and
- ensuring proper controls to prevent foreclosures when intervening events or conditions occur that warrant stopping the foreclosure process (e.g., bankruptcy proceedings, applicability of the Servicemembers Civil Relief Act, or adherence to a trial or permanent loan modification program).
They found internal audit procedures
were inadequate.
This has resulted in the following
industry reforms:
Governance and Oversight
- implement and routinely audit sound enterprise-wide policies and procedures to govern and control mortgage-servicing and foreclosure processes;
- develop quality controls for effective managementof third-party vendors who support mortgage-servicing and foreclosure processing;
- strengthen the governance standards intended to ensure compliance with applicable federal and state laws and company policies and procedures;
- develop company standards that emphasize accuracy and quality in the processing and validation of foreclosure and other servicing-related documents throughout the entire foreclosure process.
Organizational Structure, Staffing,
and Technology
- increase staffing to adequate levels and provide them with requisite training to effectively manage the volume of default loans and foreclosures
- upgrade information systems and practices to better store, track, and retrieve mortgage-related documents
Accountability
and Responsiveness Dealing with Consumers
- ensure borrowers are offered appropriate loss-mitigation options;
- ensure proper custody and control of borrower;
- documents related to the servicing of the mortgage;
- increase coordination between loss mitigation and foreclosure-processing units to prevent inappropriate foreclosures;
- improve communication with borrowers and establish measurable goals and incentives for delivering accurate information and responsive assistance;
- develop complaint-resolution processes that are routinely monitored and measured for quality assurance
Related Links: - Consent
Order for Bank of America (PDF)
- Consent
Order for Wells Fargo Bank, N.A. (PDF)
No comments:
Post a Comment