They also issued detailed orders to revise the way the banks deal with troubled borrowers. Under the orders, these banks have 60 days to establish plans to clean up their mortgage-servicing processes to prevent documentation errors. In addition, they must
- take steps to ensure they have enough staff to handle the flood of foreclosures;
- make sure that foreclosures don't happen when a borrower is receiving a loan modification;
- ensure that borrowers have a single point of contact throughout the loan-modification and foreclosure process;
- hire an independent consultant to conduct a "look back" of all foreclosure proceedings from 2009 and 2010 to evaluate whether they improperly foreclosed on any homeowners; and
- require each company to establish its own process to consider whether to compensate borrowers who have been harmed.
These penalties, however, did not include fines. They are coming, it is just a matter of when and how much.
These penalties also came as members of the Obama administration, along with representatives of state attorneys general met with the bank representatives as part of ongoing efforts to reach a broader deal over alleged mortgage-servicing abuses. The question is, will these penalties be a help or a hindrance to the actions being taken by the individual states against these banks. At this point, only time will tell.