AGs, banks make 'major progress' on servicing standards
Negotiations between the 50 state attorneys general and major lenders to settle the foreclosure investigation are advancing, especially on new standards for mortgage servicing. In 2010, servicers froze the foreclosure process to correct mishandled documents. Federal agencies and the 50 state AGs launched investigations. In April, the Office of the Comptroller of the Currency, along with the Federal Reserve and the Office of Thrift Supervision, signed consent orders with 14 major mortgage servicers. The orders require the servicers develop new processes for working with distressed borrowers ahead of foreclosure, but the OCC delayed the deadline for these requirements. The AG negotiations remain ongoing and could include stricter servicing standards, principal reduction initiatives and cumulative fines up to $25 billion. A spokesman for lead investigator Iowa AG Tom Miller told HousingWire the two sides are progressing on a settlement. "We’ve made a lot of progress, but there’s still a lot we need to do," the spokesman said. "We have made some major inroads on servicing standards, but we’re still working on others." A group of 12 senators sent a letter to the OCC, urging the regulator work with the 50 state attorneys general on the ongoing settlement negotiations with mortgage servicers. The letter was signed by Jack Reed (D-R.I.), Richard Blumenthal (D-Conn.), Banking Committee Chairman Tim Johnson (D-S.D.), Judiciary Committee Chairman Patrick Leahy (D-Vt.), Sheldon Whitehouse (D-R.I.), Bob Menendez (D-N.J.), Daniel Akaka (D-Hawaii), Chuck Schumer (D-N.Y.), Sherrod Brown (D-Ohio), Dick Durbin (D-Ill.), Al Franken (D-Minn.), and Jeff Merkley (D-Ore.) "Ideally, these action plans will not only clarify and improve the roles of mortgage servicers, but will also help homeowners for whom foreclosure can be prevented," the senators said in the letter. "In this regard, we urge you to consider the servicing standards proposed by the state attorneys general, and to incorporate appropriate provisions of introduced legislation that will support the work that must be done to improve the foreclosure process and help homeowners avoid foreclosure." An OCC spokesman said the enforcement actions were intended to ensure servicers fix the broken parts of the process and provide effective help to borrowers harmed by any improper actions. "We have always believed that those orders can also provide an effective framework for any remedial steps that state officials believe are necessary, and we were happy to accommodate the Justice Department's request to give banks an additional 30 days to submit their action plans," the spokesman said. "We hope that at the end of the process the concerns of both state and federal agencies will be effectively addressed." The AGs and the banks recently wrapped meetings in Washington and are scheduling the next round. Write to Jon Prior. Follow him on Twitter @JonAPrior.