ecreditdaily.comJune 5, 2012
Examinations by federal regulators from 2008 through 2010 were insufficient in “scope or application” to spot the so-called robo-signing of foreclosure documentation – an area that wasn’t even considered at risk, according to a critical report by a government watchdog.
The report is aimed at national bank regulator, The Office of the Comptroller of the Currency, an independent bureau of the Treasury Department.
Among the report’s findings: the Mortgage Banking Comptroller’s Handbook, which provides key examination guidelines covering foreclosures, had not been updated in 13 years, according to the report released last week by the Treasury Department’s Inspector General.
The OCC charters, regulates, and supervises all national banks and federal savings associations. National banks service mortgages loans held in their own portfolios and those owned by others. Most mortgage loan servicing is performed at the largest financial institutions.
On March 12, Obama administration officials and state attorneys today filed in federal court the proposed agreements with the nation’s top lenders in the $25 billion mortgage servicing settlement. The landmark filing provides compensation for up to 2 million wronged borrowers in the robo-signing of foreclosure affidavits that included false or misleading information.
Audits by federal officials detailed an uncontrolled environment where bank supervisors often joined hired hands to sign stacks of thousands of unverified documents.
The national settlement also requires stricter rules and procedures for future mortgage dealings with borrowers facing possible foreclosure.
From 2008 through 2010, the OCC “did not consider foreclosure documentation and processing to be an area of significant risk and, as a result, did not focus examination resources on this function,” the Treasury’s new report said.
The report also focused on the OCC’s outdated Mortgage Banking Comptroller’s Handbook, which provides examiners narratives on the mortgage process and suggested examination procedures.
The handbook was grossly missing newer developments in mortgage banking, including the biggest driver of the housing market collapse, the growth of asset securitization in mortgage products.
“Mortgage banking has changed significantly since the last handbook update with a greater emphasis on asset securitization and the proliferation of new mortgage products such as option ARMs and subprime mortgages, not to mention the more current increases in delinquency and foreclosure rates,” the report said. “The general mortgage banking principles and suggested examination procedures presented in the handbook remain valid but because they have not been updated to include more recent considerations, they are not complete.”
Thomas Curry, comptroller of the currency, wrote in his “management responses” to the report that the OCC will finish an updated Mortgage Banking Handbook by early 2013. He wrote that the OCC has “reviewed the coding of foreclosure-related consumer complaints and determined that the current coding was sufficient to identify consumer concerns.”
The Treasury report recommends that the OCC continue initiatives to:
- Enhance examiner focus on operational risk in its examination planning;
- Determine whether a more specific coding of foreclosure related complaints would enhance OCC’s ability to identify potential concerns with servicer performance;
- Update the Mortgage Banking Comptroller’s Handbook; and
- Develop policies requiring the periodic review and update of Comptroller’s handbooks.
Back to June 2012 Archive
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