In a partial settlement addressing so-called "robo-signing" foreclosure practices, the nation’s largest loan servicers have agreed to hire outside consultants to review foreclosures initiated in 2009 and 2010, and to compensate homeowners who should not have been foreclosed on.
Consent agreements announced Wednesday by the Office of the Comptroller of the Currency, the Federal Reserve and the Office of Thrift Supervision also prohibit loan servicers from foreclosing on homeowners who have been approved for loan modifications.
Federal regulators said they will assess fines against loan servicers separately, and that state attorneys general who are conducting their own joint investigation into the handling of foreclosure paperwork will continue to have the right to take additional enforcement actions.
Critics said that the failure of federal regulators and state attorneys general to forge a universal settlement agreement with loan servicers raises the likelihood that the impacts of the robo-signing controversy will drag on.
Foreclosure-related filings slowed during the first quarter, to their lowest level in two years, as loan servicers reviewed their procedures, buying additional time for some borrowers but creating uncertainty in housing markets.
When drafts of the proposed consent orders were leaked to the media last week, consumer advocates said they did not go far enough in holding loan servicers accountable for illegal practices.
The proposed consent orders "permit the perpetrators of these abuses to design a plan to comply with existing laws and contracts," groups including the Center for Responsible Lending, the NAACP, and the National Fair Housing Alliance said in an April 6 letter to regulators.
"This is insufficient to halt the abuses. Specific and protective measures regarding loss mitigation, account management and documentation must be included in any settlement, as well as an appropriate penalty for past illegalities," the groups charged.
The Mortgage Bankers Association today issued a statement Wednesday supporting the consent agreements as "welcome progress on these difficult and critical issues. There is nothing more important than getting the housing market back on the road to recovery, which is in the best interest of borrowers, lenders, servicers and the nation as a whole."
The OCC announced agreements with Bank of America, Citibank, HSBC, JPMorgan Chase, MetLife Bank, PNC, U.S. Bank, Wells Fargo, Lender Processing Services, and MERSCORP and its subsidiary, Mortgage Electronic Registration Systems Inc.
The Federal Reserve announced agreements with several of those companies, plus MetLife Inc., PNC Financial Services Group Inc., and SunTrust Banks Inc.
The OTS issued enforcement orders against four servicers supervised by the agency: Aurora Bank, EverBank, OneWest Bank and Sovereign Bank.