Federal regulators must levy fines against residential servicers under their purview to show there are real consequences for their "severe misconduct," according to Federal Reserve governor Sarah Bloom Raskin.
Raskin said examiners found "significant problems" at 14 federally regulated servicers that are currently subject to consent orders to fix their "sloppy and deceptive" foreclosure practices.
"The Federal Reserve believes monetary sanctions in these cases are appropriate and plans to announce monetary penalties," Raskin said at an Association of American Law Schools meeting over the weekend.
She did not indicate any timing for levying such fines. However, the Fed is working with other federal and state agencies on this matter, according to Fed general counsel Scott Alvarez who testified before a congressional panel in December.
The Office of the Comptroller of the Currency (OCC) has jurisdiction over eight of the 14 servicers that are affiliated with national banks.
The Comptroller "continues to consider appropriate civil money penalties," said an OCC spokesman.
Servicing and foreclosures problems caused by the banks have impacted the whole economy, cities and communities as well as individual homeowners, according to Gov. Raskin.
"Collectively, these problems have hampered the ability of the courts and markets to work through the foreclosure inventory in an efficient manner," she said.
Imposing fines will incentivize servicers to incorporate "strong" compliance programs as they rebuild their servicing business model, the Fed governor said