The Office of the Comptroller of the Currency (OCC) this week placed restrictions on six mortgage servicers to significantly curtail their ability to acquire mortgage servicing rights (MSRs).
The restrictions were put in place after the OCC determined that the banks had not met all of the requirements of their consent orders under the Independent Foreclosure Review (IFR) Payment Agreement, the regulator says in a press release.
The IFR was established to compensate homeowners whose foreclosures were mishandled by 15 mortgage servicers between Jan. 1, 2009, and Dec. 31, 2010. Several of those banks have already met their obligations under the settlement.
The six banks – EverBank, HSBC, JPMorgan Chase, Santander Bank, National Association, U.S. Bank National Association and Wells Fargo – are being restricted in terms of acquiring residential MSRs.
The OCC is careful to point out that the six servicers are not being restricted from servicing newly originated loans or refinances.
The servicers are, however, restricted from taking on new contracts to perform residential mortgage servicing for other parties. Similarly, they are restricted from taking on new outsourcing or subservicing contracts to other parties.
In addition, the six servicers are restricted from offshoring new residential mortgage servicing activities, as well as appointing senior officers responsible for residential mortgage servicing or risk management and compliance.
A report in the Wall Street Journal says HSBC and Wells Fargo are strictly prohibited from purchasing MSRs, entering into new contracts to conduct servicing for other parties and offshoring additional servicing activities, while the other four servicers must seek supervisory approval to take such actions.
The OCC says enforcement action will be taken against the six servicers at a future date; however, what penalties they face will depend on the corrective actions they take.
In addition, the regulator says it is lifting consent orders against Bank of America Corp., Citigroup Inc. and PNC Financial Services Corp., because it determined that these institutions have complied with the orders issued in April 2011 and amendments issued in February 2013.
The OCC also announced that any remaining uncashed payments made pursuant to the IFR Payment Agreement will be tranferred to the states at the end of this year so eligible borrowers and their heirs can still claim the funds.
To date, the IFR Payment Agreement has resulted in the distribution of more than $2.7 billion to more than 3.2 million eligible borrowers from OCC-supervised institutions. This amount represents more than 90% of the total amount available for distribution.
The OCC anticipates that approximately $280 million from OCC-supervised institutions will remain unclaimed at the end of the year.