Federal Reserve Board Releases Plans to Correct Deficiencies in Residential Mortgage Loan Servicing, Foreclosures
The Federal Reserve Board on Thursday released action plans for Citigroup and HSBC Finance Corporation to correct deficiencies in residential mortgage loan servicing and foreclosure processing. It also released the engagement letter between Ally Financial Inc. and the independent consultant retained by Ally to review foreclosures that were in process in 2009 and 2010.
In addition, the Federal Reserve released a supplemental agreement with Ally to address the institution's foreclosure review obligations following the recent action by Ally's mortgage servicing subsidiaries to seek protection under the U.S. Bankruptcy Code.
The action plans are required by formal enforcement actions issued by the Federal Reserve last year. The enforcement actions require the mortgage loan servicers regulated by the Federal Reserve and the parent holding companies of mortgage servicers to submit acceptable plans to improve their procedures and controls as well as oversight of foreclosure activities.
The enforcement actions further require the mortgage servicing subsidiaries to provide appropriate remediation to borrowers who suffered financial injury as a result of errors by the servicers. The engagement letter describes the procedures that will be followed by the independent consultant in reviewing Ally's foreclosure files to determine whether borrowers suffered financial injury as a result of servicer error.
Release of the action plans and engagement letter follows reviews conducted from November 2010 to January 2011, in which examiners found unsafe and unsound processes and practices in residential mortgage loan servicing and foreclosure processing at a number of supervised institutions.
The documents disclosed Thursday are the last to be released of those required by the formal enforcement actions issued in April 2011 against servicers regulated by the Federal Reserve and parent holding companies of mortgage loan servicers. The Federal Reserve entered into consent enforcement actions with Goldman Sachs Group, Inc., in September 2011 and Morgan Stanley in April 2012 to address deficient servicing and foreclosure practices at their residential mortgage loan servicing subsidiaries. The engagement letters and action plans required under these enforcement actions are not yet finalized and will be released after approval.
The Federal Reserve will closely follow the implementation of action plans to ensure that the financial institutions correct deficiencies and evaluate any harm that was done to homeowners in the foreclosure process in 2009 and 2010.
Ally Engagement Letter (PDF)
Ally Supplemental Agreement (PDF)
Citigroup--Section 5--Amended Supplement (PDF)
Citigroup--Section 5--Internal Audit Plan (PDF)
HSBC--Section 5--Single Point of Contact (PDF)