The Office of the Comptroller of the Currency failed to spot
widespread problems in the foreclosure practices of major banks between
2008 and 2010 because the agency’s examiners underestimated the mounting
risks and were given outdated guidance that did not address how the
industry had changed, according to a report issued Friday by the Treasury Department’s inspector general.
As foreclosures skyrocketed across the country in the wake of the financial crisis, banks routinely filed flawed and fraudulent legal documents in a rush to keep up with the wave of defaults. But officials at the Office of the Comptroller of the Currency largely missed the fact that the mortgage servicers were cutting legal corners on such a large scale, according to Friday’s report.
“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 report stated. Rather, it said, the OCC relied too heavily on the banks’ internal auditing and quality-control reports. “We believe this reliance was misplaced,” the report stated.
In addition, the report notes that the Mortgage Banking Comptroller’s Handbook used by bank examiners had not been updated since the late 1990s. The mortgage securitization business has grown far larger and more complex during that period, and the way in which loans are serviced has changed in fundamental ways.
Read more: http://www.washingtonpost.com/business/economy/bank-oversight-office-failed-to-spot-foreclosure-fraud-treasury-inspector-general-says/2012/06/01/gJQAnTiy7U_story.html
As foreclosures skyrocketed across the country in the wake of the financial crisis, banks routinely filed flawed and fraudulent legal documents in a rush to keep up with the wave of defaults. But officials at the Office of the Comptroller of the Currency largely missed the fact that the mortgage servicers were cutting legal corners on such a large scale, according to Friday’s report.
“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 report stated. Rather, it said, the OCC relied too heavily on the banks’ internal auditing and quality-control reports. “We believe this reliance was misplaced,” the report stated.
In addition, the report notes that the Mortgage Banking Comptroller’s Handbook used by bank examiners had not been updated since the late 1990s. The mortgage securitization business has grown far larger and more complex during that period, and the way in which loans are serviced has changed in fundamental ways.
Read more: http://www.washingtonpost.com/business/economy/bank-oversight-office-failed-to-spot-foreclosure-fraud-treasury-inspector-general-says/2012/06/01/gJQAnTiy7U_story.html
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