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OCC orders bank foreclosure reviews

Thursday 30 June 2011 - by Andrew Hickley

US banks that have not yet reviewed their foreclosure practices are set to be compelled to do so by the Office of the Comptroller of the Currency.

Any weaknesses in their foreclosure process must be immediately corrected, the OCC demanded on Thursday, with the "self-assessments" to be completed no later than 30 September.

Should any flaws have caused borrowers financial losses then they should be compensated where appropriate, the regulator adds.

The demand comes as part of a guidance bulletin issued by the regulator following an investigation which found that banks had "critical weaknesses" in their foreclosure governance procedures.

Conducted jointly in April with the Federal Reserve and the Office of Thrift Supervision, this probe of 14 banks found that foreclosures were often filed with improper documentation, while the institutions lacked sufficient numbers of staff to deal with distressed borrowers.

The guidance bulletin makes a number of provisions, including that banks suspend foreclosure proceedings when work is underway to modify the mortgage.

All documents supporting lawful foreclosure actions must also be properly endorsed and maintained, it said.

"While the reviews at the 14 large mortgage servicers and subsequent supervisory responses address a large segment of the mortgage servicing market, the OCC wants to ensure that all mortgage servicers under its supervision adhere to appropriate foreclosure management standards," the statement reads.

"Thus, national banks engaged in mortgage servicing, whether for their own book or others, must ensure compliance with foreclosure laws, conduct foreclosure processing in a safe and sound manner, and establish responsible business practices that provide accountability and appropriate treatment of borrowers in the foreclosure process."

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