A review of mortgage-servicing practices by U.S. regulators found serious problems with internal controls and staffing levels at the companies, which are likely to result in formal enforcement action against more than a dozen major financial institutions, according to people familiar with the situation.
The penalties against Bank of America Corp., J.P. Morgan Chase & Co., Wells Fargo & Co. and 11 other home-loan servicers being investigated since last fall over breakdowns in procedures for payment collection, loan modifications and foreclosures could include fines and changes in how the companies operate, these people said.
While regulators haven't agreed on exact details of the punishment, some banks could be notified within days of the enforcement action being taken against them.
In testimony prepared for a Senate Banking Committee hearing Thursday, John Walsh, acting head of the Office of the Comptroller of the Currency, which oversees most of the nation's biggest banks, said the probe found "critical deficiencies and shortcomings" in document procedures, oversight of outside law firms and other areas.
"By emphasizing timeliness and cost efficiency over quality and accuracy, examined institutions fostered an operational environment that is not consistent with conducting foreclosure processes in a safe and sound manner," Mr. Walsh said in his remarks. The problems violated state laws and had "an adverse affect on the functioning of mortgage markets and the U.S. economy as a whole."
Resd on.
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