A federal regulator on Wednesday lifted an enforcement action imposed against Bank of America for deficient foreclosure practices but placed new restrictions on Wells Fargo after it failed to make required improvements.
The Office of the Comptroller of the Currency took action against major mortgage lenders in 2011 and 2013 after revelations of shoddy mortgage servicing and foreclosure practices, including lost paperwork and “robo-signing” – the mass signing of paperwork without reading it.
On Wednesday, the OCC said it lifted its consent orders against Charlotte-based Bank of America, Citibank and PNC Bank. But it took additional actions against Wells Fargo, JPMorgan Chase and four other banks for failing to make required fixes in their mortgage servicing businesses.
The new restrictions on Wells Fargo and JPMorgan were somewhat surprising because they are the two biggest mortgage servicers by far, said Guy Cecala, publisher of industry publication Inside Mortgage Finance. Mortgage servicing involves collecting home loan payments and working with borrowers in default.
“My guess is they are going to devote the necessary attention now and get the restrictions lifted as soon as possible,” Cecala said.
In addition to Wells and JPMorgan, the OCC also imposed new restrictions on EverBank, HSBC Bank USA, Santander Bank and U.S. Bank. Wells and HSBC faced the most severe restrictions of the six banks.
Until its consent order is terminated, Wells is banned from entering into new contracts to perform mortgage servicing for other lenders and from shipping new work overseas.
The bank can still make new mortgages and service those loans. But the restrictions on buying mortgage servicing rights from other lenders could curb Wells’ growth, Cecala said.
For Bank of America, the OCC’s action is good news “for a company that hasn’t had much good news, certainly surrounding its servicing operation,” he said.
Morris Morgan, a deputy comptroller for large banks at the OCC, told reporters Wednesday that the three banks that satisfied the requirements have “completed a significant transformation of their operations.” The six banks placed under new restrictions will be expected to make corrections in a matter of months, he said.
“We have reserved the ability to take additional action against the six, and we plan to do so based on how quickly and effectively they remediate the remaining actions,” Morgan said.
Wells, the largest U.S. mortgage lender and servicer, is based in San Francisco but has its largest employment hub in Charlotte. Its mortgage operations are headquartered in Iowa.
“We will continue to work with the OCC to address the remaining items, and we have an action plan in place to complete that work in the coming months,” Mike Heid, president of Wells Fargo Home Mortgage, said in a statement.
The bank said it is in compliance with 83 of 98 items listed in the original 2011 consent order.
Bank of America became a major mortgage lender and servicer when it bought subprime lender Countrywide Financial in 2008, and it has spent the past seven years wrestling with problem loans and spending billions to settle government probes and lawsuits. The OCC’s action Wednesday is a sign of progress for the nation’s second-largest bank.
“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,” bank spokesman Dan Frahm said. “We have helped more than 2 million customers avoid foreclosure and put legacy mortgage issues behind us, including products and programs inherited from Countrywide.”
As part of the OCC’s initial agreement with the banks, the institutions have paid $2.7 billion to more than 3.2 million eligible borrowers. An additional $280 million is expected to remain unclaimed by the end of the year and will be turned over to state programs that will allow borrowers to receive their claims.
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