The Office of the Comptroller of the Currency (“OCC”) recently issued guidance for national banks on the appropriate methods for overseeing and managing mortgage foreclosure practices. National banks are required to perform self-assessments to ensure that their foreclosure management practices comport with the standards set forth by the OCC.
The OCC requires national banks engaged in mortgage servicing to comply with foreclosure laws, conduct foreclosure processing in a safe and sound manner, and provide accountability and appropriate treatment of borrowers in the foreclosure process. The OCC issued guidance and foreclosure management standards in the following areas: (1) Foreclosure process governance; (2) Dual track processing; (3) Affidavit and notarization practices; (4) Documentation practices; (5) Legal compliance; and (6) Third-party vendor management.
- Foreclosure process governance: Bank management must ensure that foreclosure governance processes adequately manage and control operational, compliance, legal, and reputation risk associated with foreclosure activities. Banks are required to establish policies and procedures that provide effective guidance, control, and monitoring of all foreclosure activities. Bank management must ensure that proper staffing, organizational structure and training is in place to carry out foreclosure activities in a proper and legal manner.
- Dual track processing: When it is legal under the servicing contract, banks should suspend foreclosure proceedings for an effective loan modification, thereby avoiding consumer confusion resulting from simultaneous mortgage modification and foreclosure proceedings.
- Affidavit and notarization practices: Bank management must ensure that: (1) Affidavits are truthful, accurate and supported by documentation; (2) Affiants review any supporting documentation; (3) Affiants have adequate knowledge to make attestations; and (4) Notary practices conform to state law.
- Documentation practices: Bank management must ensure that foreclosure documents are maintained and properly endorsed or assigned. Management should ensure the maintenance of a clear audit trail that reconciles foreclosure filings to verified servicer source systems of record.
- Legal compliance: Bank management must ensure compliance with all mortgage foreclosure laws and regulations, including the Servicemembers Civil Relief Act and the Bankruptcy Code.
- Third-party vendor management: Bank management should monitor and manage relationships with third-party vendors, such as law firms that conduct foreclosure proceedings. Third-party vendors should be skilled to perform their function and have clearly defined responsibilities.