Foreclosure Guidelines: OCC Takes Action

Foreclosure Guidelines: OCC Takes Action

By Ilyce Glink

The Office of the Comptroller of the Currency announced this month that it has determined a mandatory course of enforcement actions against eight high-profile mortgage servicers, including lending giants Bank of America, Citibank, JPMorgan Chase and Wells Fargo.

Unlike the loan modification programs, the banks do not have the option to sit this one out. Instead, the OCC’s corrective action plan will require institutions to resolve widespread problems that the agency’s auditors uncovered in a series of 2010 reviews.

The extensive plan demands timely improvements in the following key areas:

Better communication with borrowers – Formal and informal communications must be clear, consistent and time-sensitive.
Prevention against dual-tracking – Dual-tracking occurs when lenders continue to pursue foreclosure during the loan modification process. Going forward, servicers may not engage in foreclosure activity once a mortgage has been approved for modification. Furthermore, borrowers must be able to avail themselves of a single point of contact throughout both processes.
Oversight and control of third-party vendors – Two such vendors, Lender Processing Services (LPS) and MERSCORP (MERS) were explicitly named in the OCC’s announcement. However, this section of the plan pertains to any contractor entrusted with default management or foreclosure services.
Engagement of an independent auditing firm – Banks must procure outside accounting services to conduct a review of foreclosure actions taken between January 1, 2009, and December 31, 2010. The institutions must demonstrate compliance with federal and state laws, as well as the justification of foreclosure proceedings when initiated.
Establishment of restitution processes for borrowers – Those who believe they have been financially harmed by past and present process deficiencies must now have a place to appeal for remediation. Each servicer must also prepare and submit a plan to resolve financial injury claims caused by errors and misrepresentations delineated in the independent consultant’s report.

Real estate industry giants wasted no time in lauding the order. The Mortgage Bankers Association immediately issued a statement striking a note of hope that the OCC’s plan might finally provide the housing market a badly-needed confidence boost:

“We welcome progress on these difficult and critical issues. There is nothing more important than getting the housing market back on the road to recovery, which is in the best interest of borrowers, lenders, servicers and the nation as a whole.”