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After months of investigation, federal banking regulators issued a final cease and desist order against the 14 largest servicers that will require them to overhaul their operations.
April 13 -
While the regulatory order requires the servicers to overhaul their operations, it also bolsters a key bank defense — namely, that the significant problems uncovered in the process have not led to improper foreclosures.
April 13 -
Iowa Attorney General Tom Miller blasted a study Tuesday that said proposed servicer settlement terms could cost the economy $10 billion a year. Miller, who is leading the settlement on behalf of the attorneys general, said the study was "grossly inaccurate," and noted it was paid for by the financial services industry, including some of the servicers involved in talks with the AGs.
April 12 -
A study from three top economists says that a proposed mortgage servicer settlement from state attorneys general and a host of federal agencies would do more harm than good.
April 11 -
The only bank that has been penalized for mortgage servicing lapses got slapped for doing the opposite of what state attorneys general have been demanding.
April 10
WASHINGTON — Acting Comptroller of the Currency John Walsh defended the bank regulators Thursday for moving forward with an enforcement action against the top 14 mortgage servicers even while several of those banks continue to negotiate with state attorneys general and other federal agencies.
As talks between law enforcement officials and the banks continued to drag on, Walsh said bank regulators had no choice but to take action — despite criticism from some corners that doing so helped the servicers gain leverage in the negotiations.
"The simple answer is that we all have our jobs to do and, while we fully supported the goal of reaching simultaneous conclusions to our various enforcement actions, having established the scope of problems in our area of jurisdiction, the bank regulators had to move forward," Walsh said in a speech to the Women in Housing and Finance.
Walsh said the regulators' move should not undercut the other talks.
"My hope is that our enforcement actions will establish a framework, and the actions that state law enforcement officials and the other federal agencies may take will be complementary to, and consistent with, what we are doing," he said.
Walsh said that delaying action could have exposed borrowers to additional harm, and left safety and soundness concerns unaddressed.
The order requires servicers to improve loss-mitigation efforts and foreclosure proceedings and create a single point of contact for troubled borrowers. Regulators are also forcing servicers to upgrade technology systems for record keeping, payments and fees, ban so-called dual tracking of mitigation efforts and foreclosure procedures, improve oversight of third parties and hire third-party consultants to review recent foreclosure activities.
Walsh said the order should restore credibility to the servicer process.
"That's very important because widely reported foreclosure-processing defects have not only harmed individual troubled borrowers but they have undermined confidence in the system," Walsh said.
"Given the state of the mortgage markets, taking these steps to restore confidence is … a matter of urgency."
But he also continued to echo a key defense of banks involved in the settlement talks — that the foreclosure process, while flawed, did not lead to improper foreclosures or push borrowers into delinquency.
"As bad as the mortgage servicing breakdown was, it was not the cause of mortgage delinquencies that led to the surge in foreclosures," Walsh said.
"Rather, it was the unprecedented surge in foreclosures that exposed and exacerbated weaknesses that already existed in the process."
Walsh reiterated that regulators are also planning to establish separate servicing standards as part of a rulemaking process. Talks are already underway among the Office of the Comptroller of the Currency, the Federal Reserve Board, the Federal Deposit Insurance Corp., the Federal Housing Finance Agency and the Consumer Financial Protection Bureau, he said.
"There will be challenges with figuring out how to mash all of this together," Walsh said.
"Because a safety- and soundness-based standard applies to banks, trying to connect that seamlessly with a consumer protection standard applied to nonbanks … will be intellectually challenging, but I think that it can be done."
While some limited servicing standards were included as part of the risk-retention plan, Walsh said a separate rulemaking would allow regulators to implement new rules much faster.
Walsh said the standards would strengthen accountability and responsiveness in dealing with borrowers, ensure that troubled homeowners are presented with a range of alternatives before the initiation of a foreclosure, and require improved communication with borrowers and the development of a complaint resolution process.
"This is something we can do in a prompt and straightforward way, and more important, it's something that will have very significant benefits for homeowners," Walsh said.
