On April 13, 2011, the Federal Reserve Board (FRB) issued a press release announcing enforcement actions against 10 banking organizations requiring the organizations to “address a pattern of misconduct and negligence related to deficient practices” in mortgage loan servicing and foreclosures. The ten banking organizations listed in the press release represent approximately 65% of the servicing industry or $6.8 trillion in mortgage balances.
The FRB also announced enforcement actions against Lender Processing Services, Inc. (LPS)and MERSCORP (MERS) requiring LPS to address deficient document execution services in connection with foreclosures and MERS to address “significant weaknesses in, among other things, oversight, management supervision and corporate governance.”
The full text of the press release follows:
Release Date: April 13, 2011
For immediate release
The Federal Reserve Board on Wednesday announced formal enforcement actions requiring 10 banking organizations to address a pattern of misconduct and negligence related to deficient practices in residential mortgage loan servicing and foreclosure processing. These deficiencies represent significant and pervasive compliance failures and unsafe and unsound practices at these institutions.
The Board is taking these actions to ensure that firms under its jurisdiction promptly initiate steps to establish mortgage loan servicing and foreclosure processes that treat customers fairly, are fully compliant with all applicable law, and are safe and sound.
The 10 banking organizations are: Bank of America Corporation; Citigroup Inc.; Ally Financial Inc.; HSBC North America Holdings, Inc.; JPMorgan Chase & Co.; MetLife, Inc.; The PNC Financial Services Group, Inc.; SunTrust Banks, Inc.; U.S. Bancorp; and Wells Fargo & Company. Collectively, these organizations represent 65 percent of the servicing industry, or nearly $6.8 trillion in mortgage balances. All 10 actions require the parent holding companies to improve holding company oversight of residential mortgage loan servicing and foreclosure processing conducted by bank and nonbank subsidiaries.
In addition, the enforcement actions order the banking organizations that have servicing entities regulated by the Federal Reserve (Ally Financial, SunTrust, and HSBC) to promptly correct the many deficiencies in residential mortgage loan servicing and foreclosure processing. Those deficiencies were identified by examiners during reviews conducted from November 2010 to January 2011.
The Federal Reserve believes monetary sanctions in these cases are appropriate and plans to announce monetary penalties. These monetary penalties will be in addition to the corrective actions that the banking organizations are expected to take pursuant to the enforcement actions.
The enforcement actions complement the actions under consideration by the federal and state regulatory and law enforcement agencies, and do not preclude those agencies from taking additional enforcement action. The Federal Reserve continues to work with other federal and state authorities to resolve these matters.
The actions taken Wednesday require each servicer to take a number of actions, including to make significant revisions to certain residential mortgage loan servicing and foreclosure processing practices. 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.
The Federal Reserve will closely monitor progress at the firms in addressing these matters and will take additional enforcement actions as needed.
In addition to the actions against the banking organizations, the Federal Reserve on Wednesday announced formal enforcement actions against Lender Processing Services, Inc. (LPS), a domestic provider of default-management services and other services related to foreclosures, and against MERSCORP, Inc. (MERS), which provides services related to tracking and registering residential mortgage ownership and servicing, acts as mortgagee of record on behalf of lenders and servicers, and initiates foreclosure actions. These actions address significant compliance failures and unsafe and unsound practices at LPS and its subsidiaries, and at MERS and its subsidiary. The action requires LPS to address deficient practices related primarily to the document execution services that LPS, through its subsidiaries DocX, LLC, and LPS Default Solutions, Inc., provided to servicers in connection with foreclosures. MERS is required to address significant weaknesses in, among other things, oversight, management supervision, and corporate governance. The LPS action is being taken jointly with the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision, while the MERS action is being taken jointly with those agencies and the Federal Housing Finance Agency.
The Federal Reserve Board based its enforcement actions on the findings of the interagency reviews of the major mortgage servicers, LPS, and MERS. A summary of the findings from the reviews of the mortgage servicers is available in the Interagency Review of Foreclosure Policies and Practices, which is simultaneously being released by the Federal Reserve Board and the other agencies.
Interagency Review of Foreclosure Policies and Practices (461 KB PDF)
Consent Order for Bank of America Corp. (34 KB PDF)
Consent Order for Citigroup Inc. and CitiFinancial Credit Co. (28 KB PDF)
Consent Order for Ally Financial, Inc., ResCap, GMAC Mortgage, and Ally Bank (87 KB PDF)
Consent Order for HSBC North America Holdings, Inc. and HSBC Finance Corp. (76 KB PDF)
Consent Order for JPMorgan Chase & Co. and EMC Mtge. (39 KB PDF)
Consent Order for MetLife, Inc. (25 KB PDF)
Consent Order for PNC Financial Svs. Group, Inc. (25 KB PDF)
Consent Order for SunTrust Banks, Inc., SunTrust Bank, and SunTrust Mortgage (76 KB PDF)
Consent Order for U.S. Bancorp (25 KB PDF)
Consent Order for Wells Fargo & Co. (25 KB PDF)
Consent Order for LPS (47 KB PDF)
Consent Order for MERS (48 KB PDF)
2011 Enforcement Actions