Bankers Behaving Badly

Fed announces enforcement actions against 10 major banks for a 'pattern of misconduct and negligence.'

April 29, 2011
KEYWORDS actions , federal , mortgage
/ PRINT / ShareShare / Text Size +

The Federal Reserve Board announced formal enforcement actions requiring 10 banking organizations to address a pattern of misconduct and negligence related to deficient practices in residential mortgage loan servicing and foreclosure processing.

These deficiencies represent significant and pervasive compliance failures and unsafe and unsound practices at these institutions.

The Fed is taking these actions to ensure that firms under its jurisdiction promptly initiate steps to establish mortgage loan servicing and foreclosure processes that treat customers fairly, are fully compliant with all applicable laws, and are safe and sound.

The 10 banking organizations are: Bank of America Corp., Citigroup Inc., Ally Financial Inc., HSBC North America Holdings Inc., JPMorgan Chase & Co., MetLife Inc., The PNC Financial Services Group Inc., SunTrust Banks Inc., U.S. Bancorp, and Wells Fargo & Co.

Collectively, these organizations represent 65% of the servicing industry, or nearly $6.8 trillion in mortgage balances.

All 10 actions require the parent holding companies to improve holding company oversight of residential mortgage loan servicing and foreclosure processing conducted by bank and nonbank subsidiaries.

In addition, the enforcement actions order the banking organizations that have servicing entities regulated by the Federal Reserve (Ally Financial, SunTrust, and HSBC) to promptly correct the many deficiencies in residential mortgage loan servicing and foreclosure processing.

Those deficiencies were identified by examiners during reviews conducted from November 2010 to January 2011.

The Federal Reserve believes monetary sanctions in these cases are appropriate, and it plans to announce monetary penalties. These monetary penalties will be in addition to the corrective actions that the banking organizations are expected to take pursuant to the enforcement actions.

The enforcement actions complement the actions under consideration by federal and state regulatory and law enforcement agencies, and do not preclude those agencies from taking additional enforcement action. The Federal Reserve continues to work with other federal and state authorities to resolve these matters.

The Fed wants the offending banks to make significant revisions to certain residential mortgage loan servicing and foreclosure processing practices. Each servicer must, among other things, submit plans acceptable to the Federal Reserve that:

  • Strengthen coordination of communications with borrowers by providing the name of the person at the servicer who is the borrower’s primary point of contact;
  • Ensure that foreclosures aren’t pursued once a mortgage has been approved for modification unless repayments under the modified loan aren’t made;
  • Establish robust controls and oversight over the activities of third-party vendors that provide various residential mortgage loan servicing, loss mitigation, or foreclosure-related support, including local counsel in foreclosure or bankruptcy proceedings;
  • Provide remediation to borrowers who suffered financial injury as a result of wrongful foreclosures or other deficiencies identified in a review of the foreclosure process; and
  • Strengthen programs to ensure compliance with state and federal laws regarding servicing and foreclosures.

Post a comment to this story


What's Popular

Popular Stories

Recent Discussion

Great article! Unfortunately, most employees don’t feel valued or appreciated by their supervisors or employers. In fact, research has shown that the predominant reason team members quit their jobs is because they don’t feel valued. This is in spite of the fact that employee recognition programs have proliferated in the workplace – over 90% of all organizations in the U.S. has some form of employee recognition activities in place. But most employee recognition programs are viewed with skepticism and cynicism – because they aren’t viewed as being genuine in their communication of appreciation. Getting the “employee of the month” award, receiving a certificate of recognition, or a “Way to go, team!” email just don’t get the job done. How do you communicate authentic appreciation? We have found people have different ways that they want to be shown appreciation, and if you don’t communicate in the language of appreciation important to them, you essentially “miss the mark”. Additionally, employees need to receive recognition more than once a year at their performance review. Otherwise, they view the praise as “going through the motions”. A third component of authentic appreciation is that the communication has to be about them personally – not the department, not their group, but something they did. Finally, they have to believe that you mean what you say. How you treat them has to match the words you use. If you are not sure how your team members want to be shown appreciation, the Motivating By Appreciation Inventory (www.appreciationatwork.com/assess) will identify the language of appreciation and specific actions preferred by each employee. You then can create a group profile for your team, so everyone knows how to encourage one another. Remember, employees want to know that they are valued for what they contribute to the success of the organization. And communicating authentic appreciation in the ways they desire it can make the difference between keeping your quality team members or having a negative work environment that everyone wants to leave. Paul White, Ph.D., is the co-author of The 5 Languages of Appreciation in the Workplace with Dr. Gary Chapman.

Your Say: Who should be Credit Union Magazine's 2014 CU Hero of the Year?

View Results Poll Archive