U.S. Restricts Six Banks Over Mortgage Problems
Failure to comply with enforcement orders draws OCC fire
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 home foreclosure abuses.
The OCC said on Wednesday the six banks had not met all the requirements of consent orders issued in 2011 related to foreclosure-processing mistakes. 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 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.
OCC didn’t immediately indicate what corrective actions each bank had failed to complete.
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.
OCC officials also said that additional enforcement actions will be taken 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 they address outstanding issues.
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.
“Regulators recognized Bank of America’s improvement in the way we operate our mortgage business to better assist customers, particularly in times of financial difficulty. We have helped more than 2 million customers avoid foreclosure and put legacy mortgage issues behind us, including products and programs inherited from Countrywide,” a spokesman said in an email.
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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