Federal Reserve Board Releases Mortgage Servicing Action Plans

Foreclosure Federal Reserve Mortgage Servicing

On February 27, the Federal Reserve Board (FRB) released final action plans to be implemented by nine financial institutions to correct alleged deficiencies in residential mortgage loan servicing and foreclosure procedures. The FRB also announced that it expects to release plans for additional institutions soon. The plans are required by consent orders issued by the FRB in April 2011, and describe how the institutions will alter their servicing and foreclosure procedures by, among other things, (i) providing each borrower the name of a primary point of contact at the servicer; (ii) establishing limits on foreclosures where loan modifications have been approved; (iii) establishing robust, third-party vendor controls, including local foreclosure counsel; and (iv) strengthening compliance programs. The announcement also included the release of engagement letters between certain servicers and the third-party vendors hired to conduct reviews of foreclosures processed in 2009 and 2010. Those reviews, also required by the April 2011 orders, will determine whether borrowers suffered a financial injury that the institutions will be required to remedy. The release of the action plans follows the agreement by five of the servicers to pay a combined $766.5 million in penalties to the FRB as part of the $25 billion multi-party servicing settlement.