6 banks fail tests of mort­gage ser­vic­ing

Wells Fargo, Chase and four oth­ers still aren’t com­ply­ing with reg­u­la­tor’s stan­dards.

Los Angeles Times - - BUSINESS - By E. Scott Reckard scott.reckard@latimes.com

Four years af­ter pledg­ing to clean up wide-rang­ing fore­clo­sure abuses, Wells Fargo & Co., JPMor­gan Chase & Co. and four other banks still aren’t com­ply­ing with cus­tomer-ser­vice stan­dards im­posed by a fed­eral reg­u­la­tor.

The Of­fice of the Comptroller of the Cur­rency said Wed­nes­day that it has re­stricted mort­gage ser­vic­ing oper­a­tions at Wells Fargo, Chase, U.S. Ban­corp, San­tander Bank, Ever­Bank Fi­nan­cial Corp. and HSBC Hold­ings.

“We’re not sat­is­fied with where they are at this point in time,” Mor­ris Mor­gan, deputy comptroller for large banks, said dur­ing a con­fer­ence call.

By con­trast, the agency said it had lifted con­sent or- ders against Bank of Amer­ica Corp., Cit­i­group Inc. and PNC Fi­nan­cial Ser­vices, find­ing that they have com­plied with the or­ders is­sued in April 2011 and amended in Fe­bru­ary 2013.

Mor­gan said reg­u­la­tors ex­pect Wells, Chase and the other four non-com­ply­ing banks to take “months, not years” to meet ser­vic­ing stan­dards.

For now, the banks must seek per­mis­sion from the comptroller to name se­nior ser­vic­ing man­agers, set up off­shore call cen­ters or ac­quire mort­gage ser­vic­ing busi­ness, which col­lects pay­ments and han­dles fore­clo­sures.

The harsh­est penal­ties were against San Fran­cis­cobased Wells Fargo, Cal­i­for­nia’s largest bank and one of the top four na­tion­wide, and in­ter­na­tional gi­ant HSBC, based in Lon­don. Wells and HSBC were banned from ac­quir­ing ad­di­tional mort­gage ser­vic­ing rights or set­ting up ser­vic­ing in other coun­tries un­til they can show that they are com­ply­ing with the terms of con­sent or­ders.

The banks will be per­mit­ted to ser­vice their ex­ist­ing mort­gage port­fo­lios as well as their own newly orig­i­nated home loans.

The re­stric­tions are sig­nif­i­cant be­cause big banks and non­bank ser­vicers such as Ocwen Fi­nan­cial Corp., a spe­cial­ist in han­dling trou­bled sub­prime bor­row­ers, fre­quently trade these mort­gage ser­vic­ing rights.

For ex­am­ple, Bank of Amer­ica, which be­came the largest mort­gage ser­vicer af­ter buy­ing Coun­try­wide Fi­nan­cial Corp. in 2008, has since sold off rights to ser­vice most of the trou­bled mort­gages it ac­quired in that ill-fated deal to Ocwen and other ser­vicers.

BofA mort­gage spokesman Dan Frahm said the num­ber of bor­row­ers more than 60 days past due on home loans ser­viced by the bank had fallen to less than 150,000 from 1.4 mil­lion in 2011.

Chase re­cently ac­quired the right to ser­vice $45 bil­lion in higher qual­ity, non­delin­quent mort­gages from Ocwen.

Bank­ing reg­u­la­tors ob­tained the con­sent or­ders af­ter scan­dals in­volv­ing the so-called robo-sign­ing of fore­clo­sure doc­u­ments by of­fi­cials with­out knowl­edge of the facts as well as other le­gal short­cuts, lost pa­per­work and im­proper fees — all com­mon af­ter the mort­gage melt­down as banks strug­gled to han­dle surg­ing de­faults.

Chase said it had made “sig­nif­i­cant progress” and could com­plete the process “by the end of the sum­mer.”

Wells Fargo said it had made “sig­nif­i­cant changes” in ser­vic­ing and ex­pected “to com­plete that work in the com­ing months.”

U.S. Bank said it is “work­ing to re­solve” the agency’s con­cerns.

Jae C. Hong As­so­ci­ated Press

THE HARSH­EST PE­NAL­I­TIES were against Wells Fargo, Cal­i­for­nia’s largest bank, and in­ter­na­tional gi­ant HSBC. Above, a Wells of­fice in La Habra.

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