New Loan Servicer Rules Will Slow Clearing Of Foreclosure Backlog
Banks foreclosing on borrowers too hastily were told by the FDIC yesterday what they may be facing. The gist of the FDIC’s enforcement order is excerpted below. Over time, it looks like all servicers will need to conform to these standards. But in the near term, the risk is that this framework is one more ingredient that will slow the clear-out of the foreclosure backlog.
And the enforcement actions taken yesterday by the Federal Reserve, the OCC, and the OTS do not address the issue of fines or modifications. But the Federal Reserve said in a statement that it believes that monetary sanctions are appropriate for the affected banks it oversees, including Ally Financial, SunTrust, and HSBC. Other banks that have agreed to the enforcement actions include Bank of America, Citigroup, JPMorgan Chase, MetLife, PNC, US Bancorp, Wells Fargo, Aurora, EverBank, and Sovereign Bank. The servicers represent nearly 70% of the mortgage servicing industry, or nearly $7 trillion in mortgage balances.
“The enforcement orders issued today are important, but they are only a first step in setting out a framework for these large institutions to remedy these deficiencies and to identify homeowners harmed as a result of servicer errors. While today’s orders put these large servicers on a path to improving their management of the foreclosure process, they do not purport to fully identify and remedy past errors in mortgage-servicing operations of large institutions. Much work remains to ensure that the servicing process functions effectively, efficiently, and fairly going forward. Importantly, these enforcement orders do not contain monetary remedial measures.”