Request on foreclosure probe thwarted after three years.
As foreclosures started to increase in numbers three years ago, a certain group of bank regulators perceived that several loan holders may lose their homes unnecessarily. As a solution, these banks asked for the larger national banks to provide them details about their foreclosure operations.
When two of the largest banks,
Wells Fargo and JP Morgan Chase, refused to cooperate, state officials requested their federal regulators to help. However, the Office of the Comptroller of the Currency also denied the requests of the state governments, stating that firms should respond only to requests filed by federal officials.
John Dugan, the comptroller at that time, responded by writing that his agency was already at the planning stage on collecting information regarding foreclosures, and that any monitoring actions on top of that would only cause confusion. However, as it denied looking at the states’ conditions, it also did not scrutinize the foreclosure process, which was being done by the large national banks. The OCC then relied solely on the in-house assessments of banks, preventing them from getting any information on the current problems. They were only able to see the problems when they tripped on the housing market of the country.
John Ryan, a senior official in the Conference of State Bank Supervisors, said that the OCC had an under reaction on the chronic problem in the housing market. And even as the mortgage industry pointed out flaws in the documentation of foreclosures, the agency did not act soon, causing more problems.
Ally Financial froze foreclosures in September, after it found out that there are problems in a large number of foreclosure documents. But even at that time, the agency did not do anything to investigate on the processes of major banks. The least that it did was to ask them to create internal reviews on their own.
As the weeks passed, a lot of the national banks announced that they were in the process of reviewing their process of foreclosing properties, putting a lot of cases on hold. And even as this freeze provided new hope to homeowners, it also gave threats to the Real Estate market, which was already at a difficult position.
Two weeks ago, the OCC started sending out its staff to banks to investigate their foreclosure processes by interviewing bank employees and reviewing paperwork. The OCC is one of the four regulators of federal banks. It has recently conducted an assessment on the national banks, and regulators are hoping for a preliminary report to be published this month. However, the OCC has not yet decided if it will be made public.
Now, the OCC has become more aggressive in monitoring banks. Staff members are assigned to work fulltime inside the major banks themselves, to keep an extensive pool of information.
