Raskin says Fed will fine mortgage servicers
By Dave Clarke
WASHINGTON (Reuters) - Federal Reserve Governor Sarah Bloom Raskin on Saturday said the Fed must impose monetary penalties on banks who entered into an April agreement with regulators over how to fix problems in their mortgage servicing businesses.
"The Federal Reserve and other federal regulators must impose penalties for deficiencies that resulted in unsafe and unsound practices or violations of federal law," Raskin said in remarks to the Association of American Law Schools. "The Federal Reserve believes monetary sanctions in these cases are appropriate and plans to announce monetary penalties."
Raskin did not say when the penalties will be announced.
She said that "appropriately sized" penalties would "incentivize mortgage servicers to incorporate strong programs to comply with laws when they build their business models."
Mortgage servicers, many of which are large banks, collect home loan payments and manage issues like foreclosures.
The servicing issue burst into public view last year when government agencies began investigating bank mortgage practices, including the use of "robo-signers" to sign hundreds of unread foreclosure documents a day.
In April, 14 mortgage servicers, including Bank of America (BAC.N: Quote) and JPMorgan Chase (JPM.N: Quote), entered into a settlement with the Fed, the Office of the Comptroller of the Currency and the now defunct Office of Thrift Supervision on steps that have to be taken to correct and improve their servicing practices, such as providing borrowers with a single point of contact for questions.
As part of the agreement, these mortgage servicers have hired consultants to review foreclosures that took place in 2009 and 2010 to see if any were improper. Continued...