The federal bank regulators announced today a series of consent orders with major banks, as well as with LPS and MERS, represented as correcting the problems that came to light in last fall's Robosigning scandal. The OCC orders are available here and the Federal Reserve orders are here. The issue of penalties and sanctions remains open and is not addressed in these orders.
As expected, the federal agency deal does not prescribe principal write-downs or set targets for foreclosure reduction or for improved performance on HAMP contracts. The OCC release refers to the infamous dual-tracking process, i.e. servicers moving homes toward foreclosure sales at the same time homeowners are trying to make payment and modification arrangements. Interestingly, the OCC does not call for an end to dual tracking, but instead claims to be improving it. In fact, the agreement codifies existing practice, calling for a halt in foreclosure only once a modification has been approved, leaving open the possibility that foreclosure sales will occur while mod requests are pending. More generally, the federal agency deal is all about process, and not so much about results, i.e. ending the foreclosure crisis.
The banks will no doubt try to defuse the more aggressive state attorney general task force investigation on the strength of their deal with the Fed and OCC.
More commentary soon, after I have a chance to fully digest the deal documents.
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