By Victoria McGrane
WASHINGTON--The Office Comptroller of the Currency imposed
restrictions on the mortgage-servicing operations of six banks,
including the national bank arms of J.P. Morgan Chase & Co. and
Wells Fargo & Co., for failing to fully comply with enforcement
orders related to past home foreclosure abuses.
The OCC said on Wednesday the six banks hadn't met all the
requirements of consent orders issued in 2011 related to
foreclosure-processing mistakes. The national bank units of
EverBank Financial Corp., HSBC Holdings PLC, Santander Holdings USA
Inc. and U.S. Bancorp were also hit with additional penalties for
failing to complete "required corrective actions," the OCC
said.
The continued problems identified by the OCC varied for each
bank but included unresolved problems with the information systems
banks were directed to set up to track foreclosure and loan
modification activities, the quality of communication with
borrowers who are in the loan modification or foreclosure process,
and issues with servicing duties carried out by third-party
contractors.
The 2011 orders triggered a controversial probe into major U.S.
banks' foreclosure files to determine how many borrowers should be
compensated and were amended in 2013 when the OCC and the Federal
Reserve decided to halt the review before it was finished. The
regulators ultimately reached a settlement with 15 banks related to
foreclosure problems.
The penalties on the six banks involve restrictions on their
mortgage servicing operations, including limits on the banks'
ability to acquire residential mortgage servicing rights or
outsource their existing mortgage servicing rights. Many banks have
pulled back significantly from the mortgage-servicing industry in
recent years, but OCC officials said in a conference call that
mortgage servicing remains a "significant activity" for each of the
six banks.
"For a number of these institutions, increasing the servicing
book is still a significant part of their business strategy," said
Morris Morgan, a deputy comptroller for large banks.
"We've made significant progress, which has earned us the
highest ratings among large banks by the U.S. Department of the
Treasury's MHA Program and JD Power, and we believe we're in a
position to complete our remaining items by the end of the summer,"
a J.P. Morgan spokeswoman said in an emailed statement.
HSBC and Wells Fargo face the harshest restrictions of the six.
Both are flatly prohibited from increasing the size of their
mortgage book by purchasing servicing rights, entering into new
contracts to do servicing for other parties and offshoring
additional servicing activities. The other four banks must seek
supervisory approval to take such actions. OCC officials said the
difference reflects both the number and severity of the outstanding
problems at those two banks.
In the updated consent orders released Wednesday, the OCC said
Wells Fargo had failed to comply with 15 out of 98 action items and
HSBC had failed to comply with 45 out of 98 items.
"Wells Fargo has implemented significant changes to our mortgage
servicing operations and achieved compliance with major elements of
the original Consent Order," Mike Heid, president of Wells Fargo
Home Mortgage, said in a news release. "We will continue to work
with the OCC to address the remaining items, and we have in place
an action plan to complete that work in the coming months."
"The OCC recognized areas of progress in our mortgage servicing,
and identified other areas that need improvement," said a HSBC
spokesman. "We are actively addressing the remaining issues, and we
will continue to work closely with the OCC to ensure we fully
comply with all requirements of the Order."
OCC officials also said the regulator plans to take additional
actions--including possibly imposing fines--against the six at a
future date related to the foreclosure and mortgage-servicing
problems but just what those are will depend on how quickly the
firms address outstanding issues.
The OCC's Mr. Morgan said the regulator expects the six banks to
fix their outstanding problems "in months not years."
"The meter is still running relative to those six banks and the
nature and severity of the additional action will be based on the
length and severity of their continued noncompliance," he said.
"We take our regulatory obligations very seriously and we are
working to resolve the OCC's concerns," a spokesman for U.S. Bank
said.
"We're pleased with the substantial progress EverBank has made
remediating 91 of the 95 actionable items identified under the 2011
consent order, and we look forward to remediating the final four
items still open under the consent order," said Robert M. Clements,
EverBank's Chairman and Chief Executive Officer in a news
release.
"Santander has completed almost all of the actions that were
required. Santander has implemented a significant number of
practices to improve how mortgages are serviced, and has a plan in
place with the OCC to complete the remaining work," said a company
spokeswoman.
In addition, the OCC said it was lifting consent orders against
three big banks related to the foreclosure probe--the national bank
units of Bank of America Corp., Citigroup Inc. and PNC Financial
Services Corp.
The OCC announced it would effectively end its role in the
settlement program related to the foreclosure probe at the end of
the year. The regulator said it would transfer any remaining
uncashed payments to the states so borrowers can collect them
there. The regulator expects to have about $280 million left at the
end of the year to send to the states.
The OCC said that, to date, the program has distributed more
than $2.7 billion to more than 3.2 million borrowers from banks
overseen by the regulator, representing more than 90% of the total
funds available.
Write to Victoria McGrane at victoria.mcgrane@wsj.com
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