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Due in part to the enactment of the Dodd-Frank legislation, the regulatory and enforcement framework vis-à-vis the mortgage industry has shifted greatly, and the changes aren’t finished yet. It’s a new environment about which directors and officers should take heed.
During “Enforcement Actions and Trends,” a Nov. 4 program of the Section of Business Law’s Banking Law Committee, attendees heard from the Office of the Comptroller of the Currency, along with partners in Chicago and Washington, D.C., law firms.
Dan Stipano, deputy chief counsel, OCC, explained that with the integration of the Office of Thrift Supervision into the OCC, the latter inherited the former’s lawyers, including ones in district offices, thus expanding staffing levels. Policy shifts have led to a level playing field between thrifts and banks.
The OCC is devoting a great deal of energy and time on foreclosures, in one day bringing more than two dozen charges, leading to eight cease and desist orders. An independent consultant is currently reviewing mortgage loan cases that involve some 4.3 million borrowers.
Among requirements that the OCC called for in its consent order, issued against the eight servicers in April: a single point of contact for borrowers throughout the loan modification ad foreclosure processes, improved communications, detailed document management obligations for the lenders, stringent third-party oversight, and a plan for lenders to remediate financial injuries that have occurred due to errors and misrepresentations by servicers, through a look back at whether foreclosures complied with federal and state laws.
The guidance provided for in the order needs to be taken seriously, said Jonice Gray Tucker, partner with BuckleySandler in Washington, D.C.
At the same time as the review by the OCC, a multistate attorneys general group is investigating a wide range of issues relating to foreclosures. The states are seeking a settlement with five mortgage servicers, with terms to include refinancing of mortgages for homeowners that are underwater and cash penalties against the banks. The settlement has stalled, as California dropped out of the group—though as of this writing, the state is being wooed to return—and New York was forced to leave.
There’s also a change — dubbed a brave new world by Stipano — with respect to the Consumer Financial Protection Board. The board is poised to be very aggressive with respect to mortgage foreclosures, said Tucker, after Stipano noted that the CFPB could hire some 100 attorneys and have already reached out to state attorneys general on the foreclosure front.
John Geiringer, partner in Barack Ferrazzano, Chicago, also served as a panelist. Michael Mancusi, partner, Kilpatrick Townsend, Washington, D.C., served as moderator of the program.