by the Consumer Financial Services Group
The Office of the Comptroller of the Currency
(OCC) outlines its expectations for national bank foreclosure management
practices in guidance issued on June 30, 2011.
The guidance directs national banks to
conduct a self-assessment of such practices no later than September 30,
2011, take immediate action to correct any weaknesses identified, and
for any weaknesses that resulted in any financial harm to borrowers,
provide remediation where appropriate. It also advises banks to expect
the OCC to review such self-assessments, corrective actions, and
determinations of financial harm and related remediation in a bank's
next quarterly review or examination.
The guidance results from OCC concerns that
the servicing operations of other banks may have weaknesses similar to
those found at 14 of the nation's largest federally regulated mortgage
servicers during reviews of their foreclosure governance processes. The
reviews by the OCC and other federal banking agencies culminated in
enforcement actions against such servicers in April 2011.
The agencies' findings were detailed in a report, the Interagency Review of Foreclosure Policies and Practices.
Through the guidance, the OCC intends to communicate to all mortgage
servicers it supervises its expectations for areas of the foreclosure
governance processes in which weaknesses were found. Highlights of the
guidance include the following:
The guidance does not address detailed
mortgage servicing requirements or broader issues related to working
with troubled borrowers. According to the OCC, it is currently working
with other banking and housing agencies to develop guidance on such
issues that will be released at a later date.
In guidance on prepaid access programs issued
the day before the foreclosure guidance, the OCC noted that, beginning
July 21, 2011, the prepaid guidance will also apply to federal savings
associations. Although the foreclosure guidance does not include a
similar statement, given that the OCC is currently scheduled to assume
supervisory authority for federal savings associations on July 21, 2011
(the "designated transfer date"), we see no reason why the foreclosure
guidance would not also apply to federal savings associations beginning
Banks should consult and involve counsel in
the self-assessments, corrective actions, determinations of financial
harm, and related remediation mandated by the OCC to determine how best
to protect this information, which will inevitably be sought in
discovery in any private litigation. Since foreclosure documentation
concerns surfaced last year, several clients have retained Ballard Spahr
to conduct due diligence reviews of their mortgage foreclosure
procedures and files and to help them respond to regulatory inquiries.
We have also been retained to represent banks and servicers when
documentation issues have arisen in litigation.
Ballard Spahr's Consumer Financial Services
Group is nationally recognized for its guidance in structuring and
documenting new consumer financial services products, its experience
with the full range of federal and state consumer credit laws throughout
the country, and its skill in litigation defense and avoidance
(including pioneering work in pre-dispute arbitration programs). For
more information, please contact group Chair Alan S. Kaplinsky,
215.864.8544 or firstname.lastname@example.org; Vice Chair Jeremy T.
Rosenblum, 215.864.8505 or email@example.com; Martin C. Bryce,
Jr., 215.864.8238 or firstname.lastname@example.org; John L. Culhane, Jr.,
215.864.8535 or email@example.com; Mercedes K. Tunstall,
202.661.2221 or firstname.lastname@example.org; Keith R. Fisher,
202.661.2284 or email@example.com; Barbara S. Mishkin,
215.864.8528 or firstname.lastname@example.org; or Mark J. Furletti,
215.864.8138 or email@example.com.
Copyright © 2011 by Ballard Spahr LLP.
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