The government launched a 50 state investigation into how servicers and lenders processed foreclosures. The New Year has passed and the fall out is slowly beginning to present itself. John Walsh is head of the Office of the Comptroller of the Currency (try saying that really fast!), 14 companies were part of this investigation including some of the top lenders such as Bank of America, Ally (GMAC), JP Morgan Chase and Wells Fargo. The Office of Thrift Supervision has been conducting on site investigations and examinations of individual loan files. These investigations not only where the lenders and servicers being reviewed the electronic registration system MERS, and LPS, Lender Processing Services, which provided services to support mortgage servicing and foreclosure processing to a number of servicers.
According to the investigation and examinations Walsh told members of the Senate Banking Committee Thursday, the probe had uncovered "critical deficiencies and shortcomings in foreclosure governance processes, foreclosure document preparation processes and oversight and monitoring of third party law firms and vendor." Walsh also stated that because of the violations of state and local foreclosure laws, as well as federal regulations have had an adverse affect on the functioning of the mortgage markets and the economy.
The regulators are in the process of "finalizing actions", which may include operational changes, sanctions and penalties against servicers and remediation for borrowers who have been harmed by defects in servicer's procedures. The current environment of how the lending servicers are processing and have processed foreclosures is and not consistent with conducting foreclosure processes in a safe and sound manner.
How soon will the lenders be notified of any penalties they may be facing? According to the agencies who have examined the servicers and the lenders they could be notified as soon as within the week. Walsh stated the OCC has already reviewed and has a layout for comprehensive mortgage servicing standards, this to include 12 specific areas. Some of the new national standards will include maintaining and tracking paperwork provided by borrowers and third parties. This way the parties will not have to resubmit information over and over especially for the trial loan modification program offered by the government. As part of new standards Walsh also believes mortgage servicing standards should apply uniformly to all mortgage services and provide the same safeguards for consumers, regardless if the loan is securitized by the government.
The review by the OCC did show that servicers did consider giving home owners loss mitigation options and that the small percentage of homeowners who were foreclosed on improperly where extremely behind.
It will be interesting to see how some of the changes will impact our housing market in the long term and also the changes to Fannie Mae and Freddie Mac.
According to the investigation and examinations Walsh told members of the Senate Banking Committee Thursday, the probe had uncovered "critical deficiencies and shortcomings in foreclosure governance processes, foreclosure document preparation processes and oversight and monitoring of third party law firms and vendor." Walsh also stated that because of the violations of state and local foreclosure laws, as well as federal regulations have had an adverse affect on the functioning of the mortgage markets and the economy.
The regulators are in the process of "finalizing actions", which may include operational changes, sanctions and penalties against servicers and remediation for borrowers who have been harmed by defects in servicer's procedures. The current environment of how the lending servicers are processing and have processed foreclosures is and not consistent with conducting foreclosure processes in a safe and sound manner.
How soon will the lenders be notified of any penalties they may be facing? According to the agencies who have examined the servicers and the lenders they could be notified as soon as within the week. Walsh stated the OCC has already reviewed and has a layout for comprehensive mortgage servicing standards, this to include 12 specific areas. Some of the new national standards will include maintaining and tracking paperwork provided by borrowers and third parties. This way the parties will not have to resubmit information over and over especially for the trial loan modification program offered by the government. As part of new standards Walsh also believes mortgage servicing standards should apply uniformly to all mortgage services and provide the same safeguards for consumers, regardless if the loan is securitized by the government.
The review by the OCC did show that servicers did consider giving home owners loss mitigation options and that the small percentage of homeowners who were foreclosed on improperly where extremely behind.
It will be interesting to see how some of the changes will impact our housing market in the long term and also the changes to Fannie Mae and Freddie Mac.