Two of the nation’s biggest banks, Wells Fargo and Citigroup, have halted what’s being called “the vast majority” of their foreclosure sales. It’s being done in several states and is due to the new rules set forth by Office of the Comptroller of the Currency. Other banks either considered it or temporarily halted their own sales, but these two banking conglomerates seem to be in no hurry to get back to the business of cash sales.
Foreclosure sales are usually the final step a bank undergoes to unload houses and properties. In April, the OCC released new universal minimum standards that were to be applied to all of these foreclosure sales in the U.S. It didn’t take long – about a week – for many of the banks to cease these activities until they knew for sure they were in compliance with these new guidelines. Most were quickly able to discern they were in compliance and if they weren’t, they were able to fall in line within days. Bank of America didn’t miss a beat and never ceased its efforts, suggesting its confidence that it was within compliance.
Unsafe and Unsound
According to the OCC, Failure to comply with this guidance “may result in unsafe and unsound banking practices, non-compliance” with foreclosure related consent orders, as applicable, and/or require rescission of completed foreclosures.
That wasn’t the case for CitiBank and Wells Fargo, though. In fact, Wells Fargo’s halts are being called the “most dramatic”. There are at least five states that the bank hasn’t ratched back up and they include Oregon, Washington, Arizona, Nevada and California. For better contrast, in April, it was listing foreclosure sales at the rate of 349 every single business day. After the new rules came out, it’s conducting less than ten a day. These numbers are applicable for the southwest region and include the above referenced states.
When pushed for a comment, one bank spokeswoman said,
Wells Fargo has temporarily postponed certain foreclosure sales while we study the revised guidance from the OCC.
She went on to say she expected the delays to be “brief” and that they were taking their time “out of an abundance of caution”.
For its part, the OCC stated that it was aware the there were banks “drastically” cutting back on its foreclosure sales but didn’t go so far as to say there are massive shortcomings in those banking policies. Another spokesperson, this time for the OCC, said it hadn’t directed any type of slowdown or even temporary halts,
However, if servicers aren’t certain they…meet these standards, then pausing foreclosures is a responsible and productive step.
It could be the way the OCC staged its words of warning:
Failure to comply with this guidance may result in unsafe and unsound banking practices, non-compliance with foreclosure related consent orders, as applicable, and/or require rescission of completed foreclosures.
Inside the Guidelines
We also reviewed the new OCC guidelines and found this:
Bank servicers of residential mortgages should use these review and validation standards to determine whether a scheduled foreclosure sale should be postponed, suspended or cancelled due to critical foreclosure defects in the borrower’s file.
One industry expert also noted, the robo-signing debacle “was the only other time we’ve had a similar event where a bank slowed down significantly.”
Bad Year for Wells Fargo
It’s certainly not a good time to be an executive with Wells Fargo. The problems and roadblocks the bank hit during the massive reviews over the past few years has really only served as a path to even bigger problems. Lawsuits, fines and a host of government officials plundering through their books, line by line, can’t be a comforting thought for consumers. New York Attorney General Eric Schneiderman gave a presser a few weeks ago and didn’t bite his tongue. He said that Wells Fargo was “flagrantly” violating its “obligations to homeowners.” Executive Director for the National Association of Consumer Advocates, Ira Rheingold, said,
There have been problems with Wells’ servicing for a long time…Everybody focuses on Bank of America, but Wells has just as much trouble and the OCC is obviously serious about having them comply with the consent orders.
Consumers are quickly losing patience with the big bank too. Its CEO John Stumpf was booed off the stage in March. His home has been the site for at least one protest and there are growing demands for the government to step in and break the bank up. It’s also been the least receptive of the banks when it comes to working with customers who are in or facing foreclosure. It’s not been willing to reduce principle and doesn’t even report its data to the government on time. No one has any idea how many short sales and foreclosures the bank has completed. Finally, it’s been accused of racism in recent weeks.
It’s a safe assumption that they’re not meeting all the requirements and this is likely a preview, an early signal of what Joe Smith is going to find,
Rheingold says. Joseph Smith is the independent monitor of the national mortgage settlement and if the banks weren’t sweating before, they will soon as he’s expected to issue a report in June. At a minimum, the top five banks and service mortgagers are expected to not fare well in the report. Those include Bank of America (despite its belief it didn’t need to review the new compliance rules), Chase, Citi, Wells Fargo and Ally. Remember, they’re the ones who settled with 40 states’ attorneys general and federal regulators.
The servicer must now confirm certain information before it even begins foreclosure. It must be able to ensure the loan’s default status is accurate, if it can prove it has the legal authority to foreclose and it must be documented, it must have provided ample efforts of communications with the homeowner, if it’s taken all the steps to ensure everyone on the mortgage doesn’t qualify for protections under the Servicemembers Civil Relief Act (SCRA) and that it’s not accepted a payment from the borrower for at least sixty days. The details are in the order, but this is a snapshot of what it contains.