The so-called “engagement letters” between independent consultants and banks – ordered earlier this year and intended to fix deficient mortgage servicing and foreclosure processing practices – make it clear that no detail is too small to escape scrutiny.
The Office of the Comptroller of the Currency (OCC) released the letters between banks and the independent consultants late last month. And the consultants, hired to review banks’ 2009 and 2010 foreclosure activities, will look at everything – down to the font used in foreclosure documents and the type of paper upon which those documents are printed.
In April, consent orders against banks that were determined last year to have made a mess of mortgage servicing and foreclosure processes required those banks to hire the consultants, which were reviewed and approved by OCC.
The consultants are expected to complete their reviews in early 2012, but the banks have also been ordered to reach out to identify and “provide remediation” to borrowers.
In all, the OCC issued consent orders to eight national banks. The Office of Thrift Supervision, which has since been shuttered and absorbed by the OCC, took action against four federal savings associations and two holding companies, including Boston-based Sovereign Bank.
On Nov. 1, the OCC and the Federal Reserve Bank began mailing letters to these banks’ borrowers who were in any stage of foreclosure on their primary residence between Jan. 1, 2009 and Dec. 31, 2010.
Borrowers wishing to have foreclosures reviewed must get requests in to the OCC by April 30.
Such longer-term initiatives are expected to continue through 2012, according to OCC.
No Push-Back
Getting banks to complain about the government is easy. Getting them to say anything about the agencies that actually regulate them is not.
“Sovereign takes this matter very seriously,” spokesman Bryan Hurst told Banker & Tradesman. The bank, he said, “has been working diligently to improve our foreclosure processes and strengthen our mortgage servicing.”
Sovereign hired, and OCC approved, Treliant Risk Advisors LLC to conduct its review.
Along with the engagement letters, OCC released an interim status report on all its consent order happenings.
“Proprietary” information is redacted from the letters. And banks’ “action plans” aren’t being released by OCC because of the “extensive” amount of proprietary information included. For its part, Sovereign “is not going to comment on the specifics of things or exactly what we have been doing,” Hurst said.
But it’s clear in the interim report that the OCC has set the rules, and “we don’t typically get push-back to enforcement actions,” said Bryan Hubbard, an OCC spokesman.
The interim report lays out much of what is expected of banks when it comes to working out suspect foreclosures and cleaning up their processes for loan servicing and foreclosure proceedings.
In addition to outreach to borrowers, banks and the OCC will conduct “look back” reviews to “further identify servicer deficiencies, errors or misrepresentations that may have caused financial injury” to borrowers.
Loan servicers are also required to correct deficiencies ranging from lack of communication with borrowers to inadequately trained staff.
The consent orders also require better oversight of third-party service providers and “appropriate oversight” of the controversial Mortgage Electronic Records System (MERS), a contributor to the “robo-signing” uproar.
Some lenders and servicers have even been required to change management and leadership in order to ensure greater accountability.
