The Office of the Comptroller of the Currency (OCC) "underestimated" the risk of poor foreclosure practices at national banks and did not devote enough examination resources to identify those problems, according to the agency's chief watchdog.

The Treasury Department's inspector general said while the OCC focused on loan workout policies at major servicers, its supervision from 2008 through 2010 was "not sufficient in scope or application to identify significant weaknesses in national banks' foreclosure documentation and processing functions."

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