Fed to fine Morgan Stanley for Saxon foreclosure problems
The Federal Reserve will force Morgan Stanley (MS) to conduct a review of its previously owned Saxon Mortgage Services files and will issue a fine for alleged foreclosure abuses.
The investment bank finalized its sale of Saxon assets and servicing rights to Ocwen Financial Corp. (OCN) on Monday. Ocwen agreed to buy the firm in October, and will begin layoffs in May, closing the entire Dallas-Fort Worth operation by the end of the year.
The consent order mirrors previous actions the Fed and the Office of the Comptroller of the Currency took against 14 of the largest servicers last April. Independent foreclosure reviews at those firms are under way.
As with those firms, the Fed alleged Saxon filed affidavits in state courts that were signed en masse without proper reviews of the loan files.
The independent reviews will cover foreclosure proceedings that occurred between 2009 and the end of 2010. Morgan Stanley will be required to hire an independent consulting firm to conduct the review.
"If Morgan Stanley re-enters the mortgage servicing business while the consent order is in effect, it will be required to implement enhanced corporate governance, risk-management, compliance, borrower communication, servicing and foreclosure practices comparable to what the mortgage servicers subject to the 2011 enforcement actions were required to implement," the Fed said.
The Fed released potential fines for the top five servicers that signed the wider $25 billion foreclosure settlement with the states in March. If the five servicers do not fulfill their obligations under the settlement, the fines would be levied. For the other servicers involved in the federal consent orders, fine amounts are yet to be introduced.
The Fed said it would determine the fine amount for Morgan Stanley at a later date.