US OCC Says It Is Examining Banks' Foreclosure Procedures

The Office of the Comptroller of the Currency is examining big mortgage servicers' foreclosure practices.

The regulator's action means banks could face regulatory reprimands for botched foreclosure documentation.

The OCC, which regulates the nation's largest banks, has initiated "examinations" of foreclosure and loss-mitigation procedures at big banks, "to be conducted over the next several weeks to confirm compliance and that banks have remedied any identified issues," an OCC spokesman said.

Several mortgage servicers belonging to large banks have revealed in recent weeks that some employees signed foreclosure documents they had not personally reviewed. Such employees, who processed hundreds of foreclosure documents daily, have become known as "robo-signers" and have attracted the ire of 50 state attorneys general.

Regulators, chief among them the OCC, are also signaling their interest.

Sheila Bair, the chairman of the Federal Deposit Insurance Corp., said Wednesday FDIC-supervised banks "have limited exposure to loans signed by 'robo-signers,"' but the agency continues "to closely monitor the situation."

Richard H. Neiman, Superintendent of Banks for New York State, sent a letter to banks his department regulates on Oct. 8, requesting that they suspend foreclosures in New York until conducting a thorough analysis of their practices.

Ally Financial Inc. said on Sept. 20 it discovered "potential issues" at its GMAC Mortgage unit. The company eventually suspended foreclosures in 23 states.

After concerns surfaced at Ally, the OCC ordered large national bank servicers to review their procedures before foreclosing, and "several announced temporary suspensions of their foreclosure proceedings," the OCC spokesman said.

J.P. Morgan Chase & Co. (JPM) and Bank of America Corp. (BAC) have imposed widespread, temporary foreclosure moratoriums. Spokesmen for both banks on Thursday wouldn't say whether their actions were influenced by the OCC.

On Thursday, Wells Fargo & Co. (WFC) said it was "doing some additional reviews" of foreclosure affidavits. But Wells Fargo said it is "satisfied that our foreclosure affidavit process is sound."

Banks are regularly examined, but examinations initiated when regulators suspect problems can lead to serious enforcement actions that dictate change inside banks.

On Thursday, Jerry Selitto, the chief executive of mortgage servicer PHH Corp. (PHH), said his company "completed a comprehensive review of its foreclosure procedures" in response to regulators, and "has no plans" to halt foreclosures. Citigroup Inc. (C) has also said it has no reason to believe a foreclosure "suspension is necessary."

-By Matthias Rieker, Dow Jones Newswires; 212-416-2471; matthias.rieker@dowjones.com

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