Largest US Mortgage Servicers to Complete Foreclosure Reforms by Early 2012

Strategic Insights -

The nation's largest mortgage servicers, including Bank of America, Citigroup, and Wells Fargo, have been working to clean up their loan servicing and foreclosure practices after being slapped with cease and desist orders by the Office of the Comptroller of the Currency (OCC) in April. The servicers have been required to hire independent consultants to review their foreclosure activities in 2009 and 2010 and to correct deficient practices in their mortgage servicing activities. The OCC reported that all servicers had submitted independent consultant engagement letters and servicer action plans in July, and that work was well under way on the actions necessary to comply with the consent orders.

Key Takeaways:

  • The OCC has provided regular updates on the progress of the nation's largest mortgage servicers in implementing reforms to their loan servicing and foreclosure practices.
  • The servicers, including Bank of America, Citigroup, and Wells Fargo, have been working to correct deficient practices in their mortgage servicing activities and to beef up their oversight of third-party service providers.
  • The independent consultants hired by the servicers, including Promontory Financial Group, Deloitte & Touche, and Ernst & Young, are conducting reviews and audits of the servicers' foreclosure activities in 2009 and 2010.
  • The reviews of borrower petitions are expected to take several months, and the OCC has established a process for borrowers to request reviews of their cases if they believe they suffered financial injury as a result of servicer errors, misrepresentations, or deficiencies in the foreclosure process.
  • The servicers have been required to hire independent consultants to correct deficient practices in their mortgage servicing activities, including practices related to Mortgage Electronic Registration Systems (MERS).
  • The OCC has closely evaluated and approved consultants to prevent conflicts of interest.
  • The regulator has provided regular updates on the progress of the sevicers, stating that work was well under way on the actions necessary to comply with the consent orders, and that efforts to correct deficiencies in foreclosure processes, management oversight, and internal audit were furthest advanced.

Statistics:

  • 423 days: the timeframe for Promontory Financial Group to conduct an independent review of certain residential foreclosure actions regarding individual borrowers with respect to Bank of America's mortgage servicing portfolio (Source: Bank of America's updated engagement letter from Sept. 6)
  • 6: the number of largest U.S. mortgage loan servicers slapped with cease and desist orders by the OCC in April (Source: The OCC)
  • 2009-2010: the timeframe for the foreclosure activities that will be reviewed and audited by independent consultants (Source: The OCC)
  • January 1, 2009-December 31, 2010: the timeframe for borrowers who were in any stage of foreclosure on their primary residences and will receive letters from the integrated claims processor (Source: The OCC)

Sources:

  • The Office of the Comptroller of the Currency (OCC)
  • The OCC cease and desist orders issued in April
  • Bank of America's updated engagement letter from Sept. 6
  • Promontory Financial Group's website
  • Deloitte & Touche's website
  • Ernst & Young's website
  • PricewaterhouseCoopers' website