The largest U.S. mortgage servicers began signing agreements with regulators to improve procedures after federal investigations found they conducted foreclosures without proper review or complete documentation, two people with direct knowledge of the negotiations said.
The consent decrees, which could be signed by as many as 14 servicers including Wells Fargo & Co. and Minneapolis-based U.S. Bancorp, require companies to strengthen their systems for handling foreclosure documents and communicating with borrowers who are behind on their payments, said two people briefed on the matter, who spoke on condition of anonymity because the agreements aren't public. The deals also require firms to improve auditing and risk-management practices, the people said.
One of the people said the agreements also would assign responsibility to boards of directors to supervise loan servicing more closely.
The agreements don't include fines, the people said. Banking regulators issuing the consent decrees -- the Federal Reserve, the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the Federal Deposit Insurance Corp. -- are moving forward with procedural remedies while continuing negotiations over possible monetary penalties, they said.
Separate negotiations on lapses in foreclosure procedures are continuing between state attorneys general, federal authorities and the banks. Attorneys general have said they are seeking a 50-state settlement that includes fines and possible reductions in principal for troubled mortgages.
The consent decrees are the first sanctions to arise from last fall's investigation of so-called robo-signing, in which mortgage servicers and their contractors approved thousands of foreclosure documents without verifying their accuracy. Banks temporarily suspended foreclosures after homeowners and their lawyers complained of illegal evictions and improper fees.
In addition to Wells Fargo and U.S. Bancorp, federal regulators examined foreclosure procedures at Aurora Bank FSB, EverBank Financial Corp., Ally Financial Inc., Bank of America Corp., Citigroup Inc., HSBC Holdings PLC, OneWest, J.P. Morgan Chase & Co., MetLife Inc., PNC Financial Services Group Inc., Sovereign Bank and SunTrust Banks Inc., Acting Comptroller John Walsh said Feb. 17.
The OCC sent cease-and-desist orders to servicers in February, according to a person familiar with the matter.
