Federal Reserve Releases Action Plans for Two Loan Servicers
The Federal Reserve Board released a number of documents Thursday afternoon related to enforcement actions against several major mortgage servicers. Included in the release were action plans for Citigroup and HSBC Finance Corporation to correct deficiencies in residential mortgage loan servicing and foreclosure processing.
The action plans are in response to an enforcement action issued by the Federal Reserve last year which specified that the parent companies of mortgages servicers develop and submit plans to improve their procedures, controls, and oversight of foreclosure activities in specified areas. The Federal Reserve said that today's release will be the last for documents required by the formal enforcement actions issued in April 2011. Letters of Engagement and actions plans mandated by a September 2011 enforcement action with Goldman Sachs Group, Inc. and one in April 2012 with Morgan Stanley are not yet finalized and will be released after approval.
The Citibank action plan covers a number of points including corporate governance, revision of its business model and changes in training and administration. A few things jumped out of the 45 page document. First, in terms of strengthening its operating model Citi plans to create approximately 880 additional full-time positions for new hires or redeployment of existing Citi personnel. Approximately 820 of these new positions will be assigned to CitiMortgage which is also establishing new senior management positions including new Chief Administrative Officer, Chief Customer Officer, Mortgage Product Compliance Director and a Head of Mortgage O&T. The bank is also strengthening its mortgage servicing policies and procedures including those for handling customer complaints and oversight of legal vendors. HSBC's action plan deals with the Federal Reserve's requirement that they establish a single point of contact for borrowers.
Ally Bank released a copy of its engagement letter with PriceWaterhouseCooper, Ltd. (PWC) to serve as its independent consultant to review foreclosures that were in process in 2009 and 2010. The enforcement actions require the mortgage servicing subsidiaries to provide appropriate remediation to borrowers who suffered financial injury as a result of errors by the servicers and the engagement PWC is part of that process.
The Federal Reserve also released a supplemental agreement with Ally to address the institutions foreclosure review obligations following the recent bankruptcy filing of ResCap, Ally's mortgage subsidiary. The agreement deals mainly with the bank's obligation to insure payment of PriceWaterhouse and any other consultants hired to conduct the mandated foreclosure review.