John Walsh, the Comptroller of the Currency
, said his office and the Federal Reserve
needed to move quickly to fix a broken mortgage servicing system. Therefore, they could not wait for the 50 state attorneys general to finalize their own solution.
On Wednesday, the OCC and the Fed announced consent orders
signed by 14 mortgage servicers requiring these companies to fix mishandled foreclosures. In 2010, employees were found to be signing affidavits improperly and in some cases illegally. Distressed borrowers thinking they were near a modification were foreclosed on, and communication lines between homeowners and their servicer were flooded and overwhelmed.
The servicers have 60 days to give their plans to the regulators, even as they negotiate a separate settlement with other agencies and the 50 state attorneys general. Walsh said the problem found from their investigation was serious, and that the servicers have to do "substantial work and absorb substantial expense to fix." But many said the settlement the OCC and the Fed struck undermines the AGs
, even though Miller denied the claims
"The simple answer is that we all have our jobs to do and, while we fully supported the goal of reaching simultaneous conclusions to our various enforcement actions, having established the scope of problems in our area of jurisdiction, the bank regulators had to move forward," Walsh said. "To delay further could expose additional borrowers to harm, and leave the safety and soundness of the banks unaddressed. Our job as supervisors is to fix what is broken, and compensate those who are harmed, and that’s what our enforcement actions will do."
Walsh added that the only reassurance from his investigation was that borrowers in these foreclosures were seriously delinquent. More than 90% of the borrowers who received a foreclosure in 2010 hadn't made a mortgage payment in six months, he said in a speech Thursday before the trade group Women in Housing Finance.
"[A]s we take steps to solve the processing problem and ensure that troubled borrowers receive the full protections available under federal and state laws, our actions are unlikely to fundamentally change the trajectory of the foreclosure problem," Walsh said.
Thursday morning that foreclosures dropped 27% during the first quarter of 2011. But that was because of the pause in the process as these companies worked to correct their issues. But Walsh said the breakdown in the foreclosure process did not cause the housing crisis and the settlement struck between servicers and his office will not halt the rising levels of foreclosures.
Walsh said the affidavit problems, which have garnered the most provocative images of the scandal was not the only issue. Breakdowns occurred at almost every turn, Walsh said.
"Robo-signing may be the image that has lodged most firmly in our minds from news reports, but other deficiencies, beyond the mishandling of affidavits, were equally serious," Walsh said. "That such routine business operations could be so badly mismanaged as to raise safety and soundness concerns was, quite frankly, astounding."
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