Cease-and-desist orders issued against 8 mortgage bankers

The Office of the Comptroller of the Currency issued cease-and-desist orders Wednesday against eight national mortgage bankers, including Bank of America, PNC and Wells Fargo, for “unsafe and unsound” practices dealing with residential mortgage foreclosures.

The banks agreed to the orders, which require them to undertake a number of fixes to address concerns about the foreclosure process that came to light last year. The banks agreed to correct any mistakes that were identified during reviews undertaken in the fourth quarter of 2010. They also agreed not to foreclose on mortgages once the loan has been approved for modification.

Additionally, the OCC is requiring the banks to make sure borrowers have a single point of contact available to them throughout the modification and foreclosure process.

“These comprehensive enforcement actions, coordinated among the federal banking regulators, require major reforms in mortgage servicing operations,” acting Comptroller of the Currency John Walsh said in a statement. “These reforms will not only fix the problems we found in foreclosure processing, but will also correct failures in governance and the loan modification process and address financial harm to borrowers. Our enforcement actions are intended to fix what is broken, identify and compensate borrowers who suffered financial harm, and ensure a fair and orderly mortgage servicing process going forward.”

The eight loan servicers issued cease-and-desist orders are: Bank of America, Citibank, HSBC, JPMorgan Chase, MetLife Bank, PNC, U.S. Bank and Wells Fargo. The OCC also issued cease-and-desist orders to Lender Processing Services and its subsidiaries DocX LLC and LPD Default Solutions Inc. and the parent company of Mortgage Electronic Registration Systems Inc. (MERS).

The companies did not admit to fault and the OCC orders do not preclude potential civil penalties. The attorneys general of all 50 states have a parallel investigation going into the banks over ‘robo-signing’ and other concerns in residential foreclosures.

The Federal Deposit Insurance Corp., which participated in the interagency reviews, but is not the primary federal regulator for any of the largest mortgage servicers, commented Wednesday on the orders.

“The findings of the interagency review clearly show that the largest mortgage servicers had significant deficiencies in numerous aspects of their foreclosure processing,” the FDIC said in a statement. “These deficiencies included the filing of inaccurate affidavits and other documentation in foreclosure proceedings (so-called ‘robo-signing’), inadequate oversight of attorneys and other third parties involved in the foreclosure process, inadequate staffing and training of employees, and the failure to effectively coordinate the loan modification and foreclosure process to ensure effective communications to borrowers seeking to avoid foreclosures.”

Geoff Greenwood, spokesman for Iowa Attorney General Tom Miller, who is heading up the bipartisan multistate group, said they met with the banks a few weeks ago and negotiations are continuing.

“These orders are independent of our efforts, and we don’t expect it to limit the scope of what we’re doing,” he said. “It’s still full-steam ahead.”

The FDIC regulates a number of state nonmember banks, which collectively service less than 4 percent of residential mortgages. The agency said it has been reviewing cases of the institutions it regulates.

“To date, the review has not identified “robo-signing” or any other deficiencies that would warrant formal enforcement actions,” the agency said in a statement. “The FDIC will continue to monitor these servicers, as well as the performance of institutions servicing loans through FDIC securitizations or resolution programs.”