The federal government has taken some action regarding the foreclosure crisis. The government has decreed that all servicers under the supervision of the Office of the Comptroller of the Currency (OCC) must conduct self-assessments to examine foreclosure management practices no later than September of this year. This is an attempt to help clean up the industry. Upon completion of the assessment, the lenders must identify and “take immediate corrective action” to address weaknesses in the process. The OCC has issued this mandate in response to what regulators have called a “pattern of misconduct and negligence related to deficit practices in residential mortgage loan servicing and foreclosure processing” in 14 large mortgage servicers.
While this sounds like a good thing, it is actually frustrating many state attorneys general, who have been frustrated by the OCC since it reached its own robo-signer settlement with major lenders earlier in the year. In fact, the AGs have written a letter complaining that the federal agency is actually ignoring a “congressional mandate” that gives states the right to regulate their banks rather than the OCC. The letter also accuses the office of “preventing states from enforcing consumer protection laws on national banks” during the 2007-2009 financial crisis.
The other aspect of this is that the OCC actually does not have much authority to do anything. It has “jurisdiction” over member banks only and most lenders have certain divisions that are under the auspices of the OCC, but not the primary lending arms. As an example, you may have “ABC Bank” and it is one of the top five home lenders. But only “ABC Bank North Dakota” Is under the auspices of the OCC. There has been a lot written about the OCC, but it actually has very limited purpose and usefulness.
I suppose that it is worth mentioning all of this, but the truth is that this type of action will have limited impact on the crisis.
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