Mortgage Loans — 14 Banks Told to Reform Practices

Published by nora | Filed under Buyer / Seller Tips, Market Trends, Miscellaneous, Mortgage / Finance, Real Estate

Fourteen mortgage banks and two mortgage-related firms were issued enforcement orders by the Federal Reserve Board and the Office of Thrift Supervision to audit their policies and practices on mortgage loans and foreclosures.

The Fed, the OTS and other government agencies, namely the Office of the Comptroller of the Currency, the Federal Housing Finance Agency and the Federal Deposit Insurance Corp., concluded that these financial institutions were deficient in the handling of their mortgage lending and foreclosure processes.

The ten banks issued enforcement action orders from the Fed are the following:

The four largest banks in the country:

1.   Bank of America
2.   JPMorgan Chase, including EMC Mortgage
3.   Wells Fargo
4.   Citigroup, including CitiFinancial Credit

Other large banks:

5.   Ally Financial, including ResCap, GMAC Mortgage and Ally Bank
6.   HSBC North America, including HSBC Finance
7.   MetLife
8.   PNC Financial Services Group
9.   SunTrust Banks, including SunTrust Bank and SunTrust Mortgage
10. U.S. Bancorp

Banks Supervised by OTS:

11.  Aurora Bank
12.  EverBank
13.  OneWest Bank
14.  Sovereign Bank

Mortgage registration and foreclosure servicers:

15.  Lender Processing Services, including DocX and LPS Default Solutions
16.  MERSCORP

According to the Fed, the 14 mortgage lenders and servicers above are holding almost 36.7 million residential mortgages, representing 60 percent of the country’s total residential mortgage market. Examiners who evaluated the mortgage loan processing and servicing and foreclosure processing of these institutions found them deficient, unsafe, unsound and not complying with applicable laws.

The top five mortgage servicers based on mortgage volumes are:

1. Bank of America
2. Wells Fargo
3. JPMorgan Chase
4. Citibank
5. Ally Bank/GMAC

According to the Fed, nearly 54 million first mortgages are outstanding as of December last year, including 2.4 million at-risk mortgage loans and another two million mortgages which are already in default by 90 days or more. Based on current data, new foreclosures are expected to reach 2.5 million by December 2011.

The 16 financial institutions were given orders to take corrective actions, in addition to monetary sanctions the details of which will be announced in the coming weeks or months.

The institutions are required to submit acceptable plans to carry out the following corrective actions:

• Hire an independent company to review residential foreclosures pending within the period from January 1, 2009 through December 31, 2010
• Provide mortgage borrowers with the name of the person who will be their primary contact person
• Discontinue foreclosure proceedings on mortgages approved for modification, unless modified payments are not being paid
• Monitor the activities of third-party service providers
• Compensate or make remediation for borrowers who were wrongly foreclosed upon

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