6 Banks Cited for Failing to Fix Mortgage Services

By Popper, Nathaniel | International New York Times, June 19, 2015 | Go to article overview

6 Banks Cited for Failing to Fix Mortgage Services


Popper, Nathaniel, International New York Times


JPMorgan Chase, Wells Fargo and four other large banks will have new restrictions on their mortgage divisions.

JPMorgan Chase, Wells Fargo and four other large banks have failed to make long-promised improvements to their mortgage operations, a United States regulator has said.

The six banks and several others agreed in 2011 to make dozens of changes to the way they issued and serviced mortgages, after being accused of wrongly foreclosing on homeowners after the financial crisis. Homeowners had faced problems including bungled loan modifications, deficient paperwork, excessive fees and wrongful evictions that stemmed from the sprawling mortgage issues.

As a result of their failure to comply with the 2011 agreement, the banks will have new restrictions on their mortgage divisions, the United States Office of the Comptroller of the Currency said on Wednesday.

The agency, which is one of the primary federal regulators of financial institutions, said that the six banks cited would also face additional fines and restrictions in the coming months that would vary, based on the degree of the continuing problems.

The announcement underscored just how long it has taken the banks to correct the problems that turned up during the crisis. In 2011, regulators initially gave the banks 120 days to make improvements in a number of areas. While the banks were later given extensions, few expected the issues to persist into 2015.

The comptroller's office found that HSBC had the most continuing problems; it did not make 45 of the 98 changes it agreed to in the 2011 consent order and an amended agreement in 2013. Wells Fargo, the largest mortgage lender in the United States last year, failed to put in place 15 of the 98 changes.

Wells Fargo did not, among other things, take adequate steps to deal properly with customers in bankruptcy and did not have the proper processes in place "to ensure that all fees, expenses and other charges imposed on the borrower are assessed in accordance with the terms of the underlying mortgage note," the new consent order said.

Because of the extent of their problems, HSBC and Wells Fargo will be barred from acquiring any new mortgage servicing rights from other banks.

JPMorgan, Santander, U.S. Bank and EverBank will be able to acquire new rights only with advance approval of regulators. None of the banks will face any restrictions on mortgages they issue themselves.

The mortgage servicing arms of the banks manage the direct relationship with borrowers and deal with homeowners when they fall behind on their payments. Banks often buy the right to service mortgages issued by other institutions. Wells Fargo and JPMorgan have the largest servicing portfolios in the country.

The president of Wells Fargo Home Mortgage, Mike Heid, said in a statement on Wednesday that the bank had "implemented significant changes to our mortgage servicing operations and achieved compliance with major elements of the original consent order. …

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