Wells Fargo & Co. (WFC:US), the biggest U.S. home lender, halted some foreclosure sales until it can understand new federal guidelines on seizures sent to the nation’s large and mid-sized banks.
The rules from the Office of the Comptroller of the Currency dated last month laid out minimum standards that must be met before a foreclosed home can be sold. Citigroup Inc. (C:US) also said today it’s evaluating the OCC’s directive.
The pause is needed “while we study the revised guidance from the OCC regarding imminent foreclosure sales,” Vickee Adams, a spokeswoman for San Francisco-based Wells Fargo, said today in a phone interview. “We expect it to be brief,” she said, declining to specify which states were affected.
Mortgage firms have previously imposed moratoriums amid reports of borrowers incorrectly being thrown out of homes. Complaints pushed the five largest firms to sign a $25 billion settlement last year that ended a probe of their practices.
The impact of the new halt may be muted, with U.S. mortgages that are overdue or in foreclosure standing at a four-year low, according to data released May 9 by the Mortgage Bankers Association.
Bank of America Corp. (BAC:US) didn’t suspend foreclosure activity, said Dan Frahm, a spokesman for the Charlotte, North Carolina-based lender. “We manage our mortgage-servicing operations in compliance with all laws, regulations and standards for sound business practices,” Frahm said. U.S. Bancorp’s sales also weren’t affected, said Tom Joyce, a spokesman for the Minneapolis-based company.
Amy Bonitatibus, a spokeswoman for JPMorgan Chase & Co. (JPM:US), said the New York-based bank halted sales before resuming them shortly thereafter.
“In response to the OCC guidance and in an abundance of caution we temporarily halted foreclosure sales where we could, to validate that our process covered the guidance,” Bonitatibus said in a phone interview. JPMorgan is the biggest U.S. bank by assets.
American Banker reported on the halts earlier today.
“We are in the process of complying and following the directive set forth in the OCC guidance,” Liz Fogarty, a spokeswoman for New York-based Citigroup, said in an e-mailed statement.
The OCC posed 13 questions that must be considered before banks sell homes, such as checking whether the loan’s delinquent status is correct and that other remedies have been considered. The review must be conducted for any sale planned within 60 days, according to the document.
“The purpose of this guidance is to ensure that borrowers will not lose their homes without their files receiving pre-foreclosure sale reviews conducted under the standards listed,” according to the April 19 document. If any of the answers to the questions raise concern, the scheduled sale must be canceled or delayed, the OCC said. The Federal Reserve released similar guidance April 23.
“The OCC did not direct a slowdown or pausing,” Bryan Hubbard, an OCC spokesman, said in an e-mailed statement. “If servicers are not certain they are meeting these standards, pausing foreclosures is a responsible and productive step.”
Mortgage servicers handle billing and collections on behalf of lenders or investors who own the loans, and oversee foreclosures.
To contact the reporters on this story: Dakin Campbell in San Francisco at email@example.com; Jesse Hamilton in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: David Scheer at email@example.com