The Office of the Comptroller of the Currency, a U.S. bank regulator, said Wednesday that is restricting the mortgage servicing activities of HSBC, Wells Fargo and four other banks because they have “not completed the required corrective actions” under the major settlement known as the Independent Foreclosure Review.
The OCC said the new limitations would apply to acquisition of residential mortgage servicing or the rights to such servicing, but does not apply to servicing tied to new originations or refinancings by the banks. The restrictions also apply to outsourcing servicing to others and new contracts for the bank to perform residential mortgage servicing for other parties.
The restrictions do not prevent banks from making any new loans.
Mortgage servicers accept payments from borrowers, negotiate loan modifications and pursue foreclosures. They include lenders and outside companies that buy the rights to handle loans.
In the aftermath of the 2007-2009 financial crisis, several major banks reached a settlement with regulators over their mishandling of servicing activities, including “robo-signing”, or using defective or fraudulent documents, to improperly pursue home foreclosures. Under the Independent Foreclosure Review, more than 3.2 million eligible borrowers received more than $2.7 billion in compensation for mortgage servicing or foreclosure abuses or deficiencies.
“These restrictions vary based on the particular circumstance of each bank,” the OCC said. “In all cases, OCC examiners will continue to oversee these institutions’ corrective actions and mortgage servicing activities as part of the agency’s ongoing supervision.”
The OCC also said Wednesday that it expects approximately $280 million from OCC-supervised institutions to remain unclaimed at the end of the year under the Independent Foreclosure Review consent orders “after considerable efforts to locate eligible borrowers have been exhausted.”
“The decision to escheat all funds available from uncashed checks provides the remaining eligible borrowers and their heirs the additional opportunity to claim the funds through their states’ escheatment claims processes,” the OCC states.
Under the restrictions announced Wednesday, Wells Fargo and HSBC face the toughest rules, while JPMorgan Chase, EverBank , Santander and U.S. Bank also will have certain activities limited.
The restrictions include limitations on:
- acquisition of residential mortgage servicing or residential mortgage servicing rights (does not apply to servicing associated with new originations or refinancings by the banks or contracts for new originations by the banks);
- new contracts for the bank to perform residential mortgage servicing for other parties;
- outsourcing or sub-servicing of new residential mortgage servicing activities to other parties;
- off-shoring new residential mortgage servicing activities; and
- new appointments of senior officers responsible for residential mortgage servicing or residential mortgage servicing risk management and compliance.
Here are the amended consent orders for the six banks:
Amended Consent Order HSBC Bank USA, N.A.
Amended Consent JPMorgan Chase Bank, N.A.
Amended Consent Santander Bank, National Association
Amended Consent U.S. Bank National Association
Amended Consent Wells Fargo Bank, N.A.