Federal Banking Regulators Cease and Desist Orders (Draft) To Mortgage Servicers

8/7/2019 Federal Banking Regulators Cease and Desist Orders (Draft) To Mortgage Servicers

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DRAFTU NITED STA TES O F A MERICA

Before The

Inth e M atter of

)

) Order No. :

)

)

) Effec tive Date: F eb ru ary ~ 2011))

)

CONB~LQ.RDER

The {regulator] ("Regulatot~), as p art of an interagency h or iz on ta l r ev i ew o f m a jo r re si de nti al

mortgage servicers, h a s c on du cted an examinat ion o f the re si den ti al re al e sta te mortg age

forec losw:e p roces se s of [bank] (the "Bank" ) . Th e R eg ula to r h as i de nti fi ed C e r t a i n deficiencies

and unsafe an d unsound pract ices inth e B an k's r es id en ti al m o rtg ag e s er v ic in g a nd in t he Bank's

, i ni ti at io n a nd hand li ng of foreclosure p roc eedings. T he Regulator has inform ed the Bank o f th e

f in d i· ng s r es ulti ng f rom t he e xam in ati on .

The Bank, by and through i ts d uly elected and acting Board of Directors (''Boardj~. bas

exec uted a " Stip ulation A nd C on sent T o Issuanc e O f a Cons en t O rde r" that is d ated M a rc h ___J

2 0 1 1 , that 'i s a ccep ted by t h e Regulator. By th is S ti pu la ti on a nd Cons en t. w h ic h i s i nc or po ra te d

by r eference; 1he Bank has c onsented to the issuanc e o f this C onsent O rder ("O rder") b y the

:

R eg ulato r. T he B an k h as c omm itted to tak in g all n ec essary any a p prop ri ate s te ps to r em ed y th e

d efi c ie nc i es a nd u ns af e o r u ns ou nd p ra cti c es i de nti fi ed by th e R eg ula to r, a nd to e nh an ce th e

Bank~ s s er v ic i ng a nd for ec lo su re p r oc e ss es .

BankCons en t O rd erPage 1of21'



Regulator's Findings

The Regula to r fi nd s, a nd th e Bank ne it he r a dm i ts no r d eni es , th e following:

1 . The B~ is a serv ic er of residential m ortgages in the United States, and serv ices a

p on fc lio ofS xx xx xx d ollars in r es i den ti a l mo r tgages . Dur ing the rec en t housin g c risis , a

~ ub sta nti ally la rg e n umb er o f r es id en ti al m o rtg ag e lo an s s erv ic ed by th e B an k became delinquent

and resu lt ed in foreclosure act ions.

2 . In connec tion with c erta in fo re clo su re s o f lo an s in its se rv ic in g p ortfo lio , th e B an k:

(a ) f iled or caused to be filed in s ta te a nd fe de ra l c ou rts n um e ro us a ff id av i ts e xe cu te d

by its emp lo ye es o r emp lo ye es o f th ird -p arty se rv ic e p ro vid ers m ak in g v ario us as sertio ns ,

such as ow nership of tho m ortgage note and m ortgage, the am ount of the p rinc ip al and

i nte re st du e, a ndth e fees and expens es c h ar ge ab le to the borrow er, in w hic h the affian t

represented that th e a sse rti on s in th e affidavit w ere m ade based on p ersonal know ledge or

'based 'on a rev iew by the affian t of the relev an t books an d rec ord s, w hen , inmany c as es )

' . they w ere not based on such personal k now le dg e o r re v iew of the relev an t books an d

records;

(b) fi le d o r c au se d to b e f il ed in s ta te a nd fed era l c ou rts, o r in lo cal la nd re co rd s

offices, numerous affidavits o r o th er mo rtg ag e-related d oc umen ts that w ere not p rop erly .

. n ota riz ed , s pe ci fic ally th at w ere n ot s igned or a ffi rm e d i n th e presence of a notary;

(c ) failed to d ev ote to its fo re clo su re p ro ce ss es a de qu ate i nte rn al c on tr ols , p o li ci es ,

a nd p ro ce du re s, c om p lia nc e risk m an ag em en t, in te rn al a ud it, th ird p arty m an ag em en t,

tr ai ni ng a nd Boa rd o v er si gh t: and

(d ) failed s uf fi ci en tly to o v ers ee o uts id e c ou ns el a nd o th er th ird -p arty p ro v id ers

h and li ng f or ec lo su re ..related serv ices. .

B z m k

Cons en t O rd er

Pagetof21



Board Over!ir.ht ofCogJPliancewitb Order.

3. W ithin five (5 ) d ay s, th e B oa rd shall designate a c omm itte e to m on ito r a nd c oo rd in ate th e

B an k's c om p lia nc e w ith th e p ro visio ns o f'th is O rd er (O v ersig ht C omm itte e). T he O v ersig ht

Commi t tee shall be c om p rised of _ (# ) o r mo re d ir ec to rs .

4 . . W ithin ninety (90 ) days, then quarterly t he rea ft er , t he OVer si g ht C omm itte e sh all su bm it

a w ri tte n c om p lia no e p ro gre ss re po rt to th e B oa rd ( Com pli an ce T ra ck in g R ep ort) . T h e

Comp li an ce T ra ck in g Repor t s ha ll, at a m inim um :

(a) sep arately list eac h c orrec tiv e ac tion required by this Order ;

. (b) id en tify th e re qu ire d o r a ntic ip ate d c om p le tio n d ate fo r e ac h c orre ctiv e a ctio n; a nd

(0 ) d isc uss th e c urre nt sta tu s o f e ac h corrective a cti on . i nc lu di ng th e a c ti on (s ) ta ke n

or to be taken to c om ply w ith eac h c orrec tiv e ac tion .

5 . ' W ithin· ten (1 0 ) days o f re ce ip t o f th e C om p lia nc e T ra ckin g R ep ort, th e B oa rd sh all

re vie w th e C om p lia nc e T ra ckin g R ep ort a nd all r epo rt s r eq u ir ed t o p re p ar ed by t hi s O r de r.

Fol lowing its re vle w, th e B oa rd sh all a do pt a re so lu tio n: (a ) c ertify in g th at each d ir ec to r h as

rev iew ed the C om p lia nc e T ra ckin g R ep ort ·a nd a ll req uire d re po rts; a nd (b) documenting any

c o rr ec ti v e a c ti on s a d op te d by the Board . A c op y of the C om plianc e Trac king R ep ort and the

B oa rd re so lu tic n s ha ll be p ro vid ed to th e [h ea d o f re gio na l o ffic e] w ith in fiv e (5 ) days after th e

Board m ee tin g a t w hic h su ch re so lu tio n w as adopted.

6. Nothing contained herein shall d im inish the responsibi l i ty o f1 h e e nti re B oa rd to ensure

th e B an k's c om p li an ce with the p ro visio ns o f this O rde r. T he B oard shall r ev i ew and a do p t a ll

pol ic ies and p r oc edu re s r equ ir ed by th is O rd er p rio r to s ubm is si on to t he Regu la to r.

Cgmprehensive Adion Plan.

BankCons rm t Order

PageS of21



, 7 . W ithin th irty (30 ) days o f th is O rd er, th e B an k sh all su bm it to th e [h ead o f re gio nal

o ff ic e ] a p la n c ont ai ni ng 8. comple te d es cri pti on o f th e act ions that are n ec essary an d appropr iate

t o a c hi ev e full c om p lian ce w ith th is O rd er (A c tio n P lan ). In th e e ven t th e [h ead o f'reg io nal

o ffic e] asks th e B an k to re v is e th e Action P lan , th e B an k sh all imm ed iately m ak e th e req uested

revisions an d resu bm it th e Action Plan to th e [head of regional o ff ic e ). F o ll ow i ng

im p le men tatio n, th e B an k sh all n ot take an y ac tio n th at will c au se a s ig ni fi oa nt d ev ia tio n from ,

or material change to the A ction P lan, unless and until the B ank has received a p r io r w r it te n

d ete rm i na ti on o f n o s up e rv i so ry o b je c ti on f rom the [h ea d o f'r eg io n al office].

8. The Board shall ensure that the Bank ac hiev es and thereafter m aintains com plianc e with

th i s O r d er , i n c lu d ing , w i th o ut l im i ta ti o n, s u c ce s sf ul implementation of the Action P lan . T he

Board shall further ensure th at. up on im plem en tation o ftb e A ctio n P lan, the B ank ac hiev es an d

ma in ta in s e ff ec ti v e s er v ic i ng , f or ec lo su re an d loss mitigation a ct iv i ti es a nd operations, as w ell as

a ss oc ia te d ri sk ma na gemen t, c omp li an c e; q ua li ty c on tro l} a ud it, tra in in g) s ta ffin g, a nd re la te d

fu nc tio ns. In order to comply with th es e re qu irem e nts , th e B oa rd s ha ll:

(a) require the tim ely reporting by Bank m anagem ent of such ac tions direc ted by the

Bo ard to be taken u nder th is O rder;

(b ) ·follow ...up on any compl iance with s uc h a c ti on s ina ti m ely a nd a pp ro pria te

manners ; a nd

(0) r eq u ir e c o rr ec ti v e a c ti on be take n in a tim ely m an ner fo r an y n on -c om p lian ce with

s uc h a c ti on s.

9 . The A c tio n P lan sh all ad dres s, at a m in im um :

BankCons en t O r de r

P a ge 4 - o f2 1



(a ) financ ial resourc es to dev elop and im plem ent an adeq uate infrastruc ture to

support existing and future loss m itigatio n and forec lo sure ac tiv ities an d en sure

c om p lia nc e w ith th is O rd er;

(b ) . o rg an iza tio na l s tru ctu re, m an ag erial re so urc es an d s ta ffin g to s up p or t e xi st in g and

fu tu re lo ss m itig atio n an d foreclosure activities and e ns ur e c omp li an c e with this Order;

(0 ) m em es to benchm ark and assess the adequac y of staffing lev els rela tiv e to

exi sti ng and future loss m itigation and forec lo sure ac tiv ities; and

(d). gov ernance and controls to ensure f ul l comp l ian ce with all ap plic ab le fed era l and

s ta te la ws (i nc lu di ng , but no t lim ited to, the Serv ic em em bers C iv il R elief A ct (SC RA ))~

rules, regulations, s up er vi so ry gui da nc e; c ontr ac tual obl ig ati on s, c ourt o rd er a nd

requi rements. and the requirem ents of this O rder.

10. The Action Plan shall spec i fy timelines for complet ion of each of the requi rements of this

O rder. The tim eliness in the Ac tion P lan shall be consistent w ith any deadlin es se t forth inthis

Order.

COMI!, l ianee Fromm.

1 1 . Within th irty (3 0) day s of this O rder, the Bank s ha ll s ubm it to th e [head of regional

o ffic e] an ac cep tab le c omplian ce p ro gram to ensure that the m ortgage serv ic in g and forec losure

o peratio ns, in clu din g lo ss m itig atio n an d lo an m od ific atio n, c om p ly w ith all ap plic ab le fed eral

and sta te law s. rules. regu lations, superv iso ry guidanc e, court orders and requirem ents , and the

B ank's c ontrac tual ob ligation s to the G ov ernment S pon so red E nterp rises (OSEs) and i nve stor s.

and th e re qu ireme nts o f this Order, and a re c o ndu cte d in a safe an d soun d m an ner (C om plian ce

Program ). The Com pliance P rog ram shall be im plem ented w ithin ninety (90 ) days o f th is O rd er.

Any c orr ec tiv e a ctio n tim e fram e inth e C om plianc e P lan that is in excess of ninety ( 90 ) days. .

Bank.

Consent Order~eSof21



must be approved by the [h ea d o f re gi on al office]. T he Com plianc e Program . shall inc lude, at a

minimum: .

.(a) appropriate written policies and procedures to c on du ct, o versee, an d m on ito r

m ortg ag e se rv ic in g a nd fo re clo sure o pe ra tion s;

(b ) . p ro cesses to ensure that a ll factual assertions mad e in p lead ing s or affidav its filed

by or on behalf of the Bank a re a c cu ra te a nd tha t a ff id av i ts a re based on p e rs on al

k now le dg e o r a rev iew o f th e B an k's b oo ks an d records when th e a ff id av i t so states;

(c ) p rocesses to e ns ur e th at a ffi da v its f ile d i n f or ec lo su re a cti on s a re e xe cu te d a nd

notarized inaccordance with sta te la w re qu ire men ts, in clud in g ju ra t re quire me nts;

(d ) the dev elopm ent of standard ized affidav its and dec larations for eac h jurisd ic tion

in w hic h the Bank fi le s fo re clo su re a cti on s;

(e) p rocesses to ensure that the Bank has prop erly docum ented ow nersh ip of the

p rom issory note and m ortgage (or deed of trust) under ap plic able state law . or is

o th erw i se a proper party to th e ac tio n (as a result o f agen cy or other sim ilar status) at all

s ta ge s o f fo re clo su re a nd bankruptcy litigation;

(f) proc esses to ensure that a c lear an d a ud ita bl e t ra il e xi sts fo r al l fac tual information

conta ined in eac h affid av it o r de c la ra ti on , i n support of eac h of the charges that are l isted,

including w hether the am ount is chargeable to the borrow er and/or c la im able to the

investor;

(g) processes to en sure that forec losure sales (in clud in g the c alc ulation of the d efault

p erio d, th e emounts due, a nd c om p lia nc e w ith n otic e re qu ire me nts) and post-sale

c on flrm ario n a re in a cc ord en ce with th e t e rms o f th e mortgage loan and state and federal

lawrequirements ;

BankCons en t O rd erPage6of21 ..





(m ) an assessment of whether C'UlTentstaffing l eve ls devo ted to s er vi ci ng and

f or ec lo su re p r oc e ss es a nd o per ati on s , i nc lu d ing col lec t ions , loss mitigat ion a nd lo an

mod if ic a ti on , to e nsur e that s ta ff in g i s a d equ ate to meet C U I T e n t a nd e xp ec te d wo rk lo ad

demands;

(n) p rocesses to ensure that workloads of s erv i ci ng , fo re c lo su re a nd lo ss m i ti ga ti on

a nd lo an mo di fi ca ti on p ers on ne l, i nc lud ing si ng le p oin t o f con tac t pe rs onnel , a re

re vie we d a nd managed. S uc h rev iew s, at a m in im um , sh all a ss es s w he th er th e workload

le v els a re appropriate t o e ns ure c ompli an c e wi th th e req uirem ents of th is O rd er, and

necessary a dju stm e nts to wo rk lo ad s s ha ll p romptly fo llow th e c omp le ti on o f th e re v iew s.

An i n it ia l r ev i ew sha ll b e c om p le te d w ith in s ix ty ( 60 ) d ay s o f th is O rd er, an d su bs eq ue nt

r ev iew s s ha ll b e c on du cte d s em i -a nn ua lly ;

(a) ensure th at th e ri sk m a na gem en t, quality control, audit, a nd c omp li an c e p ro gram s

have th e r eq ui si te a uth ori ty a nd s ta tu s w i th in th e o rg an iz ati on s o th at a pp ro pri ate re v iew s

of the Bank's serv ic ing and forec losure ac ti vi tie s a nd o pe ra ti on s m ay occu r an d

deficiencies a re i de nti fi ed a nd promptly remedied;

(P) appropriate training p rog ram s fo r p erso nn el in volv ed in serv ic in g and foreclosure

p ro ce ss es a nd o pe ra ti on s, i nc lu di ng c ol le cti on s, lo ss m i ti ga ti on a nd lo an mo di fi ca ti on , to

e ns ure c omp li an c e'w i th a pp li ca ble f ed era l an d s ta te l aws ; r ul es a nd r egU la ti on s ,·

superv isory guidance, cou rt o rde rs and requ ir emen ts , and contrac tual obligat ions; an d

(q ) a pp ro pria te p ro ce du re s fo r c us tome rs in b an kru ptc y. in clu din g a p ro hib itio n o n

c olle ctio n o f fees after a b ankru ptc y stay is lifted. th e b an kru ptc y c as e is dismissed, or th e

b orrow er o bta in s a d is ch arg e i n b an kru ptc y.

Third paiiy Management.

BankCon se n t O r de r

P ag eS o f2 1



1 1 . W ithin thirty (30 ) days o f th is Order, th e Bank shall subm it to the [head of r eg ional

o ffi ce ] a c ce p ta ble p o li ci es a nd procedures fo r ou tsou rc i ng foreclosure func ti ons, i n c lud ing loss

m i ti ga ti on a nd loan modif i ca t ion. to a ny a ge nt, i nd ep e nd en t contractor, consult ing f i rm. la w finn

, (i nc lu din g lo cal c ounse l i n fo re clo su re o r b an kru ptc y p ro ce ed in gs re ta in ed to re pre se nt th e

interests of the owners of mortgages), o r o th er th ird p arty (i nc lu di ng any su bsi dia ry o r affi li ate o f

th e Bank not specifically nam ed in this Order ) (Third . .Party P ro vi de rs) . T hird party management

p oli ci es an d p ro ce du re s s hall b e im p lem en te d within n inety (9 0) day s of th is O rd er . Any

c orrec tiv e ac tion tim etable that is in exc ess of ninety (90 ) days m ust be ap prov ed by the [head of

re gi on alo ffi ce ]. T he p o li ci es and p ro ce du re s s ha ll in clu de , a t a m in im um :

. C a ) approp r ia te ove rs igh t to en su re th at T hi rd - P arty P ro v id ers c omp ly with all

. ap plic able fed eral an d state l aws , r ol es , r egu la ti on s , s u pe rv i so ry guidance ( inc luding

ap plic ab le p ortion s of R eg ulator B ulletin _ _ __ __ ))~c o ur t o rd e rs a nd r equ ir emen ts ,

c on trac tual ob lig atio ns an d th e B ank's c om plianc e p olic ies an d p ro ced ures;

(b) measures to en su re t ha t all o ri gi na l r ec o rd s tra ns fe rre d f rom th e B a nk to Third-

Pa rty P rov i der s (including th e originals of promissory notes and mor tgage documents)

rem ain w ithin the c ustody and c ontrol of the Third-Party Provider (unless filed with th e

ap pro priate c ou rt o r th e loan is o therw ise tran sferred to ano ther p arty )! an d are retu rn ed to

th e Bank o r d esi gn ate d c usto di an s a t th e c on clu sio n o t· th e p erfo rm ed serv ice . along with

all other d oc um en ts n ec essary for the B an k's fi les, an d tha t the B an k retain s im ag ed

copies o f sig nific an t d oc um en ts sent to Third- Party Providers;

(c) measures to ensure the accuracy of all d oc umen ts file d o r o th erw is e u tiliz ed on

behalf of the Bank or the owners of mor tgage s inany judic ial Or non- jud ic i al f or ec losu re

p ro c ee di ng , r ela te d b an kr up tc y p ro c ee di ng , o r inother fo rec losure- rela ted li tigation,

B a n k

Cons en t O rd er

Pa~e9.of21

...



i nc lu d ing~ but no t l im i te d to, do cument ati on suf fi c ie n t t o e st ab li sh ' owner sh ip o f th e

p romis so ry n ote an d rig ht to fo re clo se a t t he tim e the fo re c lo sure ac ti on is' commenced ;

(d) p ro ce ss es to p erfo rm a pp ro pria te d ue d ili ge nc e o n p ote ntia l a nd c urre nt T hird -

Pa rty P rov i der qualif icat ions, expertise, capac i ty. repu ta t ion , comp la in ts , i nf ormat ion

securi ty , business c onti nu ity a nd f in an c ia l v i ab il it y; to en su re ad eq uac y o f Third-Party

Prov i de r s ta ff ing l ev e ls , tr ai n in g , wo rk qu al it y, an d wo rk lo ad b al an c e;

(e) p roc esses to e ns ure th at c on tra cts p ro v id e fo r a de qu ate o v ers ig ht, i nc lu di ng

r equ ir in g Th ir d- P ar ty P r ov i de r a dhe re n ce to Bank f or ec lo su re p r oc e ss in g s ta nda rd s,

m e as ure s to e nfo rc e T hi rd -P arty P ro v id er c on tra ctu al o bli ga ti on s, a nd p ro ce ss es to ensure

timely act ion with r es pe ct to T hi rd -P ar ty P ro v id er p erf orm a nc e fa il ure s;

(f) processes to e ns ure p erio dic a ud its o f T hi rd -P arty P ro vi de r w ork fo r ti me li ne ss ,

c omp ete nc e a nd completeness and to ensure compliance with a ll app li cable federal an d

state laws. mles , regulations. supervisory guidance, c ou rt o rd ers a nd re qu irem en ts , a nd

th e B an k's e on n ac tu al o bli ga ti on s to GSEs a nd i nv esto rs , a nd to e ns ure th at fo re clo su re s

a re c on du cted in a safe an d s ou nd manne r;

(g ) p roc esses to r ev iew c us tom er c omp la in ts a bo ut T hi rd -P ar ty P ro v id er s er vi ce s;

(h) p ro ce ss es to p re pa re contingency a nd b us in es s re co v er y p la ns f or im po rta nt

Third-Party Providers in th e ev en t o f sh ort-te rm o r lo ng -term s erv ic e d is ru ptio n; a nd

(i) a certification p ro ce ss fo r la w firm s (a nd recertification o f e xistin g la w finn

p ro v id ers ). a s q ua li fi ed to s erv e a s T hi rd -P ar ty P ro v id ers to th e Bank.

M.or tgage E lec t ron ic Registration Svstem.

1 2 . W ithin thirty (30 ) days o f th is O rd er, th e B an k sh all s ubm it to th e [head of regional

o ffic e] an ac cep table p lan to en su re a pp ro p ri ate c on tro ls a nd o v er si gh t o f fo re cl os ure a cti vi ti es

aankCons en t O r de r

Page 1 0 Q f2 1



w i th in r es pe ct to th e M ortg age E lec tron ic R eg istration S ystem (M ER S) an d c om plian ce with.

MERS ' m em be rsh ip ru le s, te rm s, an d condi t ions (MERS Requ i r ements ) (M ER S Plan) . T he

MERS P lan sh all b e i mp lem en ted within n in ety ( 90 ) day s of this O rd er. A ny c orrec tiv e ac tion

t ime tab le t ha t is in exc ess of ninety (90) days must b e ap pro ved by the [h ead o f regional office].

T he MERS P lan sh all in clu de. at a m inim um :

(a) p rocesses to ensure th at all mortgage as s ignments an d endo r sements to or out of

MERS~ n am e are ex ec ute d o nly by a certizying officer author ized by M ER S an d

. ap prov ed by the Bank;

(b) p ro c es se s to e ns ur e that th e Bank main ta ins up -to-dat e co rporat e resolut ions from

MERS fo r a ll B an k emplo ye es a n d third-parties who a re c er ti fy in g o ffi ce rs authorized by

.. M ER S, and up-to-date lists o fMBRS c erti fy in g o ffic ers ;

(e) p rocesses to ensure c om pliance w ith all M ER S Requirem ents and with th e

re qu irem en ts o f'th e MERS Co rp or ate Resolu t ion Man ag em en t S yste m (CRMS) ;

C d ) processes to e nsu re th e a cc ur ac y a nd r eli ab ili ty o f data reported to MERS,

i nc lud ing monthly s ys tem ..to -s ys tem re c on c ili ati on s fo r a ll MERS man da to ry r ep o rti ng

f ie ld s, a nd daily c ap tu re o f all rejec ts /warnings report s assoc ia ted with registrations,

tr an sfe rs , a nd s ta tu s u pd ate s o n o pe n- item a gi ng r ep orts . Unresolved i tem s m ust b e

m a in ta in ed o n open-i tem a gi ng re po rts a nd tr ac ke d u ntil reso lu tio n. M an ag em en t sha ll

d ete rm i ne a nd re po rt whether the fo re c lo sures cu r ren tl y pending inM ER S' nam e are

a cc ura te and how many a re l is te d in e rr or , a nd desc ribe how the da ta on the M ER S

sy ste m w ill be correc ted;

(e) an app rop riate MERS q ua lity assura nc e w orkp lan , w hic h clearly descr ibes all

t es ts , t es t fr eq ue nc y , s am p li ng m e th od s, re sp on si ble p arti es , a nd th e e xp ec te d p ro c es s fo r

BankConsent OrderPage 1 1 of2l



o pe n-ite m fo llo w-u p, an d in clu de s a n an nu al in de pen den t tes t o f th e c on tro l s tru ctu re o f

th e s ys tem -to -s ys tem re co nc ili ati on p ro c es s, th e re je ct/w a rn in g e rro r c o rre cti on p ro c es s,

'a nd a dh eren ce to th e Bank ' s M ERS P lan ; an d

(t) i nc lu si on o fMERS into th e B an k's th ird -p arty v e nd or m a na gemen t p ro c es s,

which shal l include a d eta ile d ana ly si s of potent ial vulnerabi li t ies . i n c lud ing i n fo rma ti on

s ec u ri ty , b us in es s c o nti nu ity , a nd v e nd or v i ab ili ty a ss es sm e nts .

Forec losure Review.

13 . Within th irty ( 30 ) days o f th is O rd er, th e B an k sh all re tain an in dep en den t c on su lta nt

a cc ep ta ble to th e [head o f reg io nal o ffic e] to c on du ct an in dep en den t rev iew o f c erta in resid en tial

f or ec losu re a c ti ons r eg a rd in g i nd iv i du al bo rr owe rs with respect to th e B ank's se rv i c in g p o rt fo li o.

T he re v iew s ha ll i nc lu de re si de nti al f ore clo su re a cti on s o r p ro c ee di ng s ( in clu di ng fo re clo su re s

that w ere in p ro ce ss o r c om p le ted ) b ro ug ht in the nam e of the Bank, or in the nam e of the agen t

fo r th e B an k. Or the inv esto r (in clud in g M ERS ), th at h av e b een p end in g at an y tim e fro m Jan uary

t2 0 0 9 to Dec em b er 3 1 ~ 2 01 0 , as w ell a s re sid en tial fo re clo su re sa les that OCCUlted during this

t ime p e ri od ( Fo re c lo su re R e v iew ).

1 4 . Within fiv e (5 ) d ay s. o f th e en gag em en t o f th e in de pe nd en t consultant descr ibed in

P aragrap h 1 3, b ut p rio r to th e c omm enc em ent o f the F orec losure R ev iewt

th e B an k sh all su bm it

to th e [head o f r eg io na l o ff ic e ] fo r approval a n e ng ag eme nt le tte r th at s ets fo rth :

.(a) theme th od olo gy fo r c on du ctin g th e F orec lo su re R ev ie w, in clu din g: (i) a

. d esc rip tio n o f th e in fo nn atio n sy ste m s a nd d oc um e nts to b e rev iew ed , in clu din g th e

sele ctio n o f c rite ria fo r files o r a sp ec ts o f file s to be r ev i ewed; (li) th e c ri te ri a fo r

e v al ua ti ng t he r ea son ab le ne ss o f'f ee s a nd p e na lt ie s; (iii) o th er p ro c ed u re s n ec e ss ar y to

. m ak e th e req uired d ete rm in atio ns { su ch as th ro ug h in terv ie ws o f e m plo yee s a nd t h i r d .

Bank

Cons en t O rd erPage 120f21



p artie s a nd a p ro ce ss fo r th e rec eip t a nd re vie w o f'b orro we r c l a ims a nd c om p la in ts ); a nd

( iv ) any p ro p os ed s amp l in g te c hn iq ue s. ' T he engagement letter shal l c on ta i n a f ul l

descript ion o f th e s ta ti st ic a l b a si s f or t he sampl ing me th od s c h os en , a s we ll a s p ro c ed ur es

to in cre as e th e s iz e o f th e s am p le d ep en di ng o n re su lts o f th e i nitia l samp lin g;

(b). expertise and resourc es to be d ed ic ate d to th e F or ec lo su re R e vi ew ;

(c ) c om p letion of the F orec losure R ev iew an d the F orec losure Repor t within one

hundred tw en ty (1 20 ) days of'the start o f the engagem en t; and

(d ) a w ritten c omm itm en t th at an y work p ap er s a ss oc ia te d w i th th e F ore clo su re

Review shal l be mad e a va ila ble to th e Regulator i mm ed ia te ly u po n request.

1 5 . The p urp ose of the F orec losure R ev iew sh all be to d eterm in e, at a m in im um :

(a) ' w hether a t th e tim e th e fo rec lo su re a ctio n w as init iated o r th e p le ad in g o r a ffid av it

flIed ( in c lu di ng i n bankruptcy p ro ce ed in gs a nd in d efe nd in g su its b ro ug ht by borrowers) ,

t he for ec lo si ng party ha d p ro pe rly d oc um en te d own ers hip o f th e p rom is so ry n ote a nd

m ortg ag e (or d eed of trust) un der relev an t state law , or w as otherw ise a p rop er party to

the ac tion as a result o f a ge nc y o r s im ila r s ta tu s;

(b) whether th e fo re clo su re w a s i nc om pli an c e w i th a pp li c ab le f ed e ra l l aws , i nc lu d ing

but n ot lim ite d to th e SCRA ;

(c ) whether a forec losure sale oc curred w hen the m ortg ag e loan w as under

c on sid era tio n fo r a lo an m od ific atio n o r o th er 10s5 m itlg atlo n, w as p erfo rm in g i n

accordance with a trial or p erm an en t loan m od ific ation , or w as n ot indefault for a

su ffic ie nt p erio d o f tim e to a uth oriz e fo re clo su re u nd er th e te rm s o f th e m o rtg ag e lo an

d oc um e nts a nd re la te d agreements , o r fo re clo su re w as o th erw is e n ot a uth oriz ed u nd er

relevant state or fed eral law , in clud in g th e S CM and ' th e U .S . Bankrup tcy Code ;

Bank

Co n se n t O r de r

Page 13ofll

"

'..



.(d) w hether, w ith respect to non-j ud i c ia l for ec losu re s , t he p rocedu re s fo ll ow e d w i th

re sp ec t to th e f ore clo su re s al e ( in c lu di ng th e c a lc u la ti on o f th e d efa ult p er io d, th e

am ou nts d ue, an d compliance with no ti c e pe ri ods ) an d pos t- sa le confi rma t ions w ere in

ac cord an ce w ith the term s of the m ortg ag e loan an d state law req uirem en ts;

(e) whether an y de li nquen t bo rrower 's ac count w as c harged fees or penalties that

w ere n ot p erm issible un der the term s of the borrow er's Ioen d oc um en ts, state or federal

Iaw~o r w e re o th erw is e u nre as on ab le ;

(f) whether the freq uen cy th at fees w ere assessed to any delin qu ent b orrower's

a cc ou nt ( in c lu di ng b ro ke r p ri ce o pi ni on s) was e xc es siv e u nd er th e terms ofthe

b orro we r's lo an d oc um en ts, sta te o r fe de ra l law, o r we re o th erw is e u n re asonab le ;

(g) whe th er lo ss mit igat ion activities with re sp ec t to fo re clo se d lo an s w ere h an dled in

accordance with th e requ irem en ts o f th e H om e A ffo rdab le Mod if ic a ti on P ro g ram , an d

c on sis te nt w ith th e p olic ies a nd p ro ce du re s a pp lic ab le to th e B an k's p ro prie ta ry lo an

modi fi ca ti on s o r o th er l os s m i ti ga ti on programs, suc h that eac h borrow er had an ad eq uate

o pp ortu ni ty to apply for a loss m itigation option or program , any suc h a pp li ca ti on w a s

han dled p ro perly , a fin al decision w as m ade on a reasonable basis, and w as

c ommun ic ate d to th e b orro we r b efo re th e fo rec lo su re s ale ; a nd

(h) whether any e rro rs , m i sr ep re se nta ti on s, o r o th er d ef ic ie nc ie s re su lte d i n d ire ct o r

i nd i re c t f in an c ia l i nju ry to th e b orro we r, th e m ortg ag ee , o r o th er party.

1 6 . The i nd ep en de nt c on su lta nt s ha ll p re pa re a w ritten rep ort d eta ilin g th e fin din gs of th e

F ore clo su re R ev ie w (F ore clo su re R ep ort) , w hi ch sh all b e c om p le te d w ith in n in ety (9 0) days of

engagement Immediately u po n c omp le ti on , th e- Fo re clo su re R ep or t s ha ll b e s ubm itte d to the

[h ea d o f re gio na l o ffic e] a nd th e B oard .


P age 1 4 of2 1



1 7 . W ithin t h i r t y (3 0 ) d ay s of s ubmis sio n o f th e Foreclosure Report to th e Board, th e Bank

s hall su bm it to th e [h ea d of reg io na l o ffic e J a n ac cep ta ble p la n to :

(a) rem ed iate, as ap prop riate. errors, m isrep resen tations, or other d efic ien cies to the

Regu la tor 's s a ti s fa c t ion ;

(b) re im b urs e th e b orrow er , a s a pp ro pri ate . a ny im pe rm i ss ib le o r e xc es si ve p en alti es ,

fees or ex pen ses, or f or o th e r d ir ec t o r i nd ir ec t f in an c ia l i n ju ry iden ti fi ed i n a c co rd anc e

w ith th is O rd er;

(c ) m ake app ropriate adjustm ents for the ac counts the aSEs or any i nv e sto r; a nd

.Id) tak e ap pro pria te ste ps to rem ed iate a ny fo re clo su re sa le w here th e fo re clo su re w as

not authorized a s d e sc r ib e d in th is O r de r,

Manag eme n t I nf ormati on Systems.

1 8 . W ith in thirty (30 ) days ofth ls O rder, the B ank shall subm it to th e [head of regional

offic e] an ac cep table p lan for o pe ra ti on o f i ts management i nf ormat ion system s (M IS ) for

f or ec lo su re a nd l os s m i ti ga ti on o r loan modi f i cat ion ac t iv i t ie s . The M IS plan shall be

implemented within n in ety (9 0) d ays of this O rder. A ny c orrec tiv e ac tion tim efram e that is in

ex cess of n in ety (90 ) d ays m ust be ap prov ed' by the [head of reg ion al offic e]. T he p Ian shall

in clu de , a t a m in im um :

(a) a descr ip t ion of the v arious c om ponen ts of MIS used by the Bank for foreclosure

, a nd loss m itigation or l oan mod i fi c at ion activities;

(b) a d esc rip tion of and tim etable for an y needed c ha ng es o r upgrades to :

( i) mon ito r c omp li an c e with all ap plic ab le fe de ra l an d s ta te la ws, ru les ,

regulat ions, s up erv is ory g ui da nc e) c ou rt o rd ers a nd re qu irem en ts , c on tra ctu al

obligations, MERS Requi remen ts . an d th e req uiremen ts o f th is O rd er;

Ba n k

Con se n t O r de r

Page ISo£21

'.



(u) e ns ure th e o ng oi ng a cc urac y o f re co rd s fo r all se rv i c ed mor tgages ,

i nc lu din g, b ut n ot li mite d to . records necessary to e sta blis h o wn ersh ip a nd th e

right to fo rec lo se b y th e a pp ro pria te p arty fo r a ll se rv ic ed m ortg ag es, o utstan din g ,

ba lan ce s, an d fe es a sse sse d to th e borrower; and

(iii) meas ure s to e ns ure that l oan forec losu re and modi fi ca ti on s ta ffs h av e

s uffi ci en t a nd tim ely a cc es s to i nfo rm a ti on p ro v id ed by th e b or rowe r r eg a rd ing

l oa n f ore clo su re a nd mo di fi ca ti on a cti vi ti es ;

(c ) testing the in te gri ty a nd a cc ura cy o f the new or enhanc ed M IS to ensure that

r epor ts generat ed by th e system p ro v id e n ec es sa ry i nf orm a ti on fo r a de qu ate mo ni to ri ng

an d quality controls.

Mortgage Servicing.

1 9 . W ith in thirty (3 0) d ays ofthe Order, the B ank shall subm it to the [head of reg ional

o ff ic e ] a n a c ce p ta bl e p lan t along with a tim elin e, fo r e nsu rin g e ffe ctiv e c oo rd in atio n o f

communica t ions with b orro we rs , b oth o ra l a nd w ritte n, re la te d to m itig atio n o r lo an modification

a nd fo re clo su re a ctiv itie s to en su re th at c ommun ic atio ns are tim ely and e ff ec ti v e: a re d e si gn ed to

a v oi d c o nf us io n to b orro we rs , to e ns ure c on tin uity in th e h an dlin g o f b orro we rs' lo an file s d urin g

th e lo an modi fi ca ti on and fo re c lo su re p ro c es s by personnel knowledgeable about a specific

bo rr ower's s it ua ti on : to ensure re aso na ble a nd good faith ef fo r ts , consi s ten t with a pp li ca ble law

and contrac ts . to engage on lo ss m i ti ga ti on a nd fo re clo su re p re v en ti on fo r d eli nq ue nt lo an s,

w he re a pp ro pria te ; a nd to e nsu re that d ec is io ns c on c ern in g lo ss m i ti ga ti on o r lo an mo di ti t:a ti on s

continue to be made and c ommuni c ate d ina tim ely fashion . P rior to subm ittin g the p lan , t h e

B an k shall c on duc t a rev iew to d eterm in e w hether p roc esses in volv in g p ast d ue m ortg ag e loan s

.or fo rec losu res ov erlap in suc h a w ay that they m ay im pair or im ped e a borrow er's efforts to

Bank.

Cons en t O rd erPage 16of2\

.



effectively pU IBUe a loan m odific ation. The p lan shall be im plem ented w ithin n inety (90 ) days of

th is o rd er . Ally c orre cti ve a cti on tim e fram e that is inexcess of n inety (90 ) days m ust be

approved by th e [head of reg ional offic e]. The p lan shall inc lude, at a m inim um :

(a) measures to ensure that staff handling loan modi fi ca ti on r equ es ts r ou ti ne ly

communicates an d c oordin ates w ith staff p roc essin g the forec losure on the borrow ers

property;

(b ) app rop riate dead lines for responses to borrower c ommunic ations and requests for

c on sid eration of loss m itigation , in clud in g d ead lin es for dec ision-m akin g on loss

m i ti ga ti on a c ti v iti es ;

(0 ) estab lishm ent of an easily acc essible and reliab le sing le p oin t of c ontac t for eac h

borrow er to obtain in form ation throug hout the loan m od ific ation and forec losure

p roc esses. A single p oin t of c on tac t shall c onsist of a liv e person em ployed or reta ined

by the Bank and not a series of p hone p rom pts or rec ord ing s;

(d ) a requ iremen t th at eac h w ritten c om munic ation w ith the borrow er iden tify suc h

sin gle p oin t o f contact along with one or m ore d irec t m eans of communicat ion ' W i th th e

contact;

(e) m easures to ensure that the sing le point of c ontac t has acc ess to c urrent

i nf ormati on and pe rs onnel ( in-house or third-party) sufficient to t imely. a cc ura tely , ~ d

adequate ly inform the b orrower o f th e current s ta tu s o f th e lo an modi fi c ati on and

f or ec lo su re a c ti v it ie s;

.,. (f) m easures to ensure that staff are train ed sp ec ific ally in handl ing mortgage

d eli nq ue nc ie s, lo ss m i ti ga ti on and lo an modif icat ions ;

~ankCon se nt O r de r

Page 17of21



(g) p ro ced ures an d c on tro ls to en su re th at a fin al d ec isio n re gard in g a b orrower's lo an

m o dific atio n req uest (w heth er o n a trial o r p erm an en t b as is ) is m ad e and communicated

to the b orro wer in w ritin g and in vo lv es th e single p oin t o f c on tac t w ith in a reaso na ble

tim e b efo re an y fo re clo su re sa le o cc urs :

(h) p rocedures and contro ls to en su re th at w hen th e b orrowe r's lo an h a s been

modif ied on a trial or pe rmanent b as is a nd th e b orrow er h as c omp li ed with the term s o f

the mod i fi c at ion : (i) no foreclosure Of le ga l a cti on p re di ca te to fo re clo su re o c cu rs ; (ii) th e

single point o f c on tac t rem ain s av aila ble to th e b orrower an d continues t o b e re fe re nc e d

on a ll w ritten c ommun ic atio ns w ith th e b orrower; a nd (iii) po li c ie s a nd p ro c ed u re s

e nab le b orrowers to m ake c om p lain ts reg ard in g th e m o dific atio n p ro ce ss, d en ial o f

m od ific atio n req uests. th e fo rec lo su re p ro cess. o r fo rec lo su re ac tiv ities w hic h p rev en t a

b orrower from p ursu in g m od ific atio n o ptio ns, a nd a p ro ce ss fo r m ak in g b orrowers aw are

o(the comp lai n t p rocedur es :

(j) procedures for the p rom pt rev iew , escalation, a nd re so lu tio n o f b orrowe r

c ompla in ts , i nc lu di ng a p ro c es s to c ommun ic ate th e resu lts o f th e rev iew to t he bo rr owe r

on a tim ely basis: and

(k) policies and p ro ce du re s fo r c on sid erin g m o dific atio n o f an y ju nio r lien loan

owned by th e s erv ic er o r. a ny o f'its a ffi li ate s a nd s ec u re d by a first m ortgage lien o n the

s ame p rope rty, ifth e b orrower b ec om es n in ety (9 0) days or m ore past due on the first lien

mortgage;

( 1 ) p olic ies an d p ro ced ures to ensure t hat p ayment s are credited in a p rompt and

timely manner; that p aym en ts. in clu din g p artial p aym en ts. are ap plied to sc he du led

Ba n k

Cons en t O r de rPage 1 8 of21



principal and interest be fo re fe es ; and that any mi sa p p li c ati o n o f bo rr owe r fu nd s is

corrected ina p rom pt and t imely manner ;

(m ) p olic ies and p ro cedu res to en su re that tim ely in form atio n ab out lo ss m itig ation

opt ions i s s en t to t he bo rr owe r in th e ev en t o f a d elin qu en cy or de fau lt ; i n c lud ing

understandable n oti ce s a bo ut th e pendency o f lo an modificat ion and forec losure

proceedblgs;and

(n ) p olic ies and p roc edures to ensure that foreclosure a n d r el ate d d o c umen ts p r ov i de d

to b orrow ers a nd th ird p artie s are ap pro pri ate ly m ain tai ne d a nd tra ck ed , an d that

borrowers g en era ll y w i ll n ot b e required to res ubm it th e same d oc um en ted in fo rm ati on

that has alre ad y b ee n p ro vi ded , a nd that bo rr owe rs a re no ti fi ed p romp tly of the need for

add it iona l i n fo rma tion .

E ff ec ti v e Da t! , ln c o,..r po ra ti on o f St ipula t ion .

2 0 . This O rder is effec tiv e o n the E ffec tiv e D ate as sh ow n o n the first p ag e. T he S tip ulatio n

is made a part hereof and is incorporated herem by this reference .

Duration.

· 21 . This O rder shall rem ain in effec t unti l terminated, modi fi ed , o r su sp end ed b y writ ten

n otic e o f su ch a ctio n by th e Regu la to r , a c ti ng by a nd t hr ough i ts authorized represen ta t ives .

T ime Ca i eu l at ioDs .

22. Caloulation of time limitations for compl iance with th e te rm s of th is O rd er ru n fro m th e

E ffe ctiv e D ate an d sh all b e b ased o n c ale nd ar days , un le ss o th e rw i se n o te d.

2 3. T he [h ead o f reg io nal o ffic e], o r an R eg ulato r au tho rized rep resen tativ e, may extend an y

of th e d ead lin es se t fo rth i n th e p ro v isi on s o f th is O rd er u po n w ri tten re qu est by th e Bank : ' that

Bank

Cons en t O rd er

Page 190[21



i nc ludes r ea son s insu pp ort fo r an y s uc h e xte nsi on , Any Regu la to r ex tens ion shall be m ade in

writing.

Submissions and Notices.

2 4 . A ll submissions, inc luding an y rep orts , to the R egulator th at are requ ired by or

contemplated by th is O rder sh all b e su bm itted w ithin th e sp ec ified tim efram es,

2 5 . E xc ep t as o th erw ise p ro vid ed h erein , all su bm issio ns; req ues ts , c omm un ic atio ns ,

c on sen ts o r o th er d oc um en ts relatin g to this O rder shall be inw riting and sent by first c la ss U .S .

m ail (or by rep utable ov ern ig ht c arrier, electronic fac sim ile transm ission o r hand del ivery by

messenge r) add re ss ed as follows:

(a) TotheRegula tor:

[h ea d o f re gio na l o ffic e]

. (b) T o the B an k;

No ViolatioDs Authorized.

26. Nothing inthis Order or the S ti pu la ti on s ha ll be c onstrued as allow ing the Bank, it s

B oa rd , o fflc ers , o r emp lo ye es to v io la te a ny law, r ul e, o r r egu la ti on .

IT IS SO O RD ER ED .

Regula to r

By:~ ~ _

Date: See Effec tiv e Date on page 1


P ag e 2 0 o f2 1

Documents

Federal Banking Regulators Cease and Desist Orders (Draft) To Mortgage Servicers