Results in Brief

OCC examination procedures during the period 2008 through 2010 were not sufficient in scope or application to identify significant weaknesses in national banks’ foreclosure documentation and processing functions. During this time OCC did not consider foreclosure documentation and processing to be an area of significant risk and, as a result, did not focus examination resources on this function. The nature and extent of concerns found by OCC during its inter-agency horizontal review3 of mortgage foreclosure processes at major mortgage servicers indicate that OCC underestimated the level of risk in the function during the period we reviewed. We noted a number of conditions that, taken together, may have contributed to this underestimation. These conditions are discussed in more detail in the findings and recommendations section of this report. In addition, we noted that the Mortgage Banking Comptroller’s Handbook, which, among other things, provides the suggested examination procedures covering foreclosures, had not been updated in 13 years.

We are recommending that OCC (1) continue initiatives to enhance examiner focus on operational risk in its examination planning, (2) determine whether a more specific coding of foreclosure related complaints would enhance OCC’s ability to identify potential concerns with servicer performance, (3) update the Mortgage Banking Comptroller’s Handbook, and (4) develop policies requiring the periodic review and update of Comptroller’s handbooks.

In a written response, which is included as appendix 2, OCC agreed to the recommendations. OCC stated that it (1) had undertaken a number of actions to enhance examiner focus on operational risk; (2) had reviewed the coding of foreclosure-related consumer complaints and determined that the current coding was sufficient to identify consumer concerns; (3) planned to update the Mortgage Banking Comptroller’s Handbook as part of its broader project to integrate OCC and OTS policies and examination handbooks; and (4) recently issued a policy development manual that addresses the development and updating of OCC handbooks. We consider the actions taken and planned by OCC to be responsive to our recommendations. However, OCC will need to identify and record planned completion dates for taking certain corrective actions in the Joint Audit Management Enterprise System (JAMES), the Department of the Treasury’s audit recommendation tracking system.

Full report below…

~

4closureFraud.org

~

SAFETY AND SOUNDNESS: OCC’s Supervision of National Bank’s Foreclosure Practices