Mortgage Servicers May Face Sanctions, New Rules, Regulator Says

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U.S. banking regulators investigating flawed foreclosures are “finalizing” remedial requirements and sanctions against mortgage servicers, Acting Comptroller of the Currency John Walsh said.

Banking regulators, the Department of Justice, and state attorneys general began reviewing foreclosures last fall at the 14 largest federally regulated loan servicers, including Bank of America Corp., Wells Fargo & Co., Citigroup Inc. and the GMAC unit of Ally Financial Inc., after evidence surfaced that bank employees and contractors were seizing homes without proper review or complete documentation.

In testimony prepared for a hearing of the Senate Banking Committee today, Walsh said regulators uncovered “critical deficiencies and shortcomings” that “resulted in violations of state and local foreclosure laws, regulations, or rules and have had an adverse effect on the functioning of the mortgage markets and the U.S. economy as a whole.”

Federal Housing Administration Commissioner David Stevens told a congressional panel yesterday that government agencies could come to agreement on enforcement actions and financial penalties within about a month.

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