OCC directs banks to internally assess foreclosure practices by Sept. 30

Subject: Foreclosure Management
Date: June 30, 2011

To: Chief Executive Officers of All National Banks, Department and Division Heads, and All Examining Personnel

Description: Supervisory Guidance

Purpose

The Office of the Comptroller of the Currency (OCC) is issuing guidance to communicate the OCC’s expectations for the oversight and management of mortgage foreclosure activities by national banks. Further, the OCC is directing national banks that have not already done so, to conduct self-assessments of foreclosure management practices to ensure that their practices conform to the expectations outlined in this guidance. The self-assessments should include testing and file reviews and be appropriate in scope, considering the level and nature of the bank’s mortgage servicing and foreclosure activity.

This guidance is focused on providing OCC expectations for national bank foreclosure management practices. It does not address detailed mortgage servicing requirements or broader issues related to working with troubled borrowers. The OCC and other federal bank regulatory and housing agencies are developing guidance to address the full range of mortgage servicing issues that have surfaced during the current housing crisis. The guidance on the broader mortgage servicing issues resulting from this effort will be released at a later date. For purposes of this guidance, bank managers should refer to the April 2011 Interagency Review of Foreclosure Policies and Practices.

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The Office of the Comptroller of the Currency directed national banks to conduct a self-assessment of foreclosure practices by Sept. 30.

In April, 14 major mortgage servicers including Bank of America (BAC: 10.96 -1.62%), JPMorgan Chase (JPM: 40.94 +1.21%), Wells Fargo (WFC: 28.06 -0.04%), Citigroup (C: 41.64 +0.34%) and Ally Financial (GJM: 23.82 +0.59%) signed consent orders with the OCC, the Office of Thrift Supervision and the Federal Reserve. The agreements settled an investigation into questionable foreclosure practices that came to light at the end of 2010.

The consent orders require servicers to hire a third party for a review of foreclosure files in order to determine if homeowners were harmed directly from any insufficiencies. However, the regulators said the reviews will not be made public.

The OCC said Thursday all banks under its supervision must complete the self-assessments, even those that did not sign consent orders.

"Banks that identify weaknesses in their foreclosure processes through the self-assessment should take immediate corrective action," the OCC said. "Banks should determine if the weaknesses resulted in any financial harm to borrowers and provide remediation where appropriate."