Banking regulators open probe into foreclosure document processes
The Office of the Comptroller of the Currency is launching an inter-agency investigation into alleged documentation problems at Mortgage Electronic Registration System (MERS), acting Comptroller of the Currency John Walsh said Wednesday in prepared remarks for Congressional testimony. Citing a "breakdown in foreclosure governance and controls that we expect national banks to maintain," Walsh characterized the recent errors in major bank's foreclosure processes as unacceptable. "[W]e are taking aggressive actions to hold national banks accountable, and to get these problems fixed," according to his prepared remarks. Major lenders, including Bank of America (BAC), JPMorgan Chase (JPM) and Ally Financial, suspended foreclosure sales in early October when employees were found signing affidavits without reviewing the documentation. MERS, an electronic loan registry designed to track ownership of specific loan notes, has been harshly criticized by consumer attorneys and related groups that say the company doesn't have the legal standing to serve as plaintiff in certain foreclosures. MERS officials have steadfastly maintained the legality of the system and its processes, with CEO R.K. Arnold denying any problems in written testimony also scheduled to be delivered before the House Financial Services Committee on Thursday. "The role and function of MERS were initially crafted in conformance with, and continues to rest, on long established law and legal principles," according to his written testimony. Walsh said the investigation into MERS will be done in coordination with the Federal Reserve, the Federal Deposit Insurance Corp., and the Federal Housing Finance Agency. The OCC's Walsh also said the agency is participating in a separate Federal Reserve-led investigation at Lender Processing Services (LPS), regarding document processes that major banking clients ask the firm to provide. LPS is a major provider of technology and services to lenders and servicers nationwide. LPS officials said in October that the company has not executed affidavits containing substantive borrower information on behalf of its lender/servicer clients since September 2008, and that during the time it did perform these services the firm had "processes in place to ensure the information in the affidavits was validated and that the affidavits were signed properly," according to a statement. "We expect to have most of our on-site examination work completed by mid to late December. We then plan to aggregate and analyze the data and information from each of these examinations to determine whether or what additional supervisory and regulatory actions may be needed," Walsh said, noting that he expects analysis to be available by the end of January. Write to Jon Prior.