The Office of the Comptroller of the Currency (OCC) is ordering all national banks to conduct in-house reviews of their foreclosure management practices and prepare reports for OCC examiners.
"National banks engaged in mortgage servicing, whether for their own book or others, must ensure compliance with foreclosure laws [and] conduct foreclosure processing in a safe and sound manner," according to an OCC supervisory bulletin issued Thursday morning.
National banks should conduct these self-assessments no later than September 30 and take immediate correction actions. This includes reimbursing borrowers for any financial harmed caused by the bank.
OCC examiners conducted reviews of foreclosure practices at the 14 largest national banks in the fourth quarter of 2010 and found "critical weaknesses" that the banks are required to correct.
The June 30 bulletin generally spells out the scope of the reviews that OCC expects.
However, the bulletin also provides guidance on "dual tracking."
Borrowers are "often confused" when the servicer is working with them to modify the loan and the borrower continues to receive foreclosure notices.
"To reduce this confusion, management should suspend foreclosure proceeding for successfully performing trial-period modifications where they have the legal authority to do so under their servicing contracts," the bulletin says.