Federal banking regulators have extended a deadline for the nation’s largest mortgage servicers to submit plans for revamping their business practices, in particular loan modifications and foreclosures.
In April, 10 mortgage services agreed to deliver plans to the Office of the Comptroller of the Currency, the Federal Reserve and the soon-to-be defunct Office of Thrift Supervision.
By delaying the deadline, the regulators are granting a separate group of state and federal officials more time to work out a broader settlement with the firms over allegations of abuses in their foreclosure practices.
The April deal represented the first major action by federal regulators after widespread reports and lawsuits charged that mortgage servicers were using fake documents, forged signatures and other shortcuts to quickly evict families from their foreclosed homes. The revelations prompted servicers to temporarily halt foreclosures.
The agreement required the servicers to identify and compensate borrowers who may have suffered financial harm. It also called on the companies to provide a single point of contact for struggling borrowers, many of whom complained of getting the runaround when they tried to get help. The deal also barred the servicers from negotiating loan modifications with borrowers while also pressing to foreclose on their properties.
The companies were scheduled to submit a plan Monday. But the OCC and the Fed said they would extend the deadline by 30 days. In a statement, the OCC said the change came “at the request of the U.S. Department of Justice and to allow coordination of actions with other agencies at the state and federal level.”
The Justice Department, state attorneys general and several federal agencies are negotiating a separate settlement with the banks, which sources say might force the companies to pay at least $20 billion in fines and force them to slash the loan balances of certain borrowers. That plan would also revamp mortgage servicing standards.
On Monday, the Justice Department said through a spokeswoman that it appreciates the regulators’ assistance in providing additional time to coordinate efforts.
As the deadline set by the three federal agencies drew near, state and federal officials asked the agencies to extend it, hoping to hammer out a set of potentially more stringent standards that would satisfy all parties.
“We have the issue of timing,” Iowa Attorney General Tom Miller acknowledged in a recent interview, adding that he hoped that “what we’re able to negotiate with banks, that that will become the plan.”
When the OCC announced its agreement in April, the agency said the deal would not undermine the broader settlement coordinated by Justice. At the time, acting Computroller of the Currency John Walsh said the plans would “dovetail.”
The banks that signed on to the agreements are Ally Financial, SunTrust, HSBC, Bank of America, Citigroup, J.P. Morgan Chase, MetLife, PNC, U.S. Bancorp and Wells Fargo. The banks represent 65 percent of the mortgage servicing industry, or nearly $6.8 trillion in mortgage balances.