Morgan Stanley Next Federal Target for Servicing Practices
By: Esther Cho
Morgan Stanley may have sold its servicing sector off, but it’s still going to be under a watchful eye for previous practices. The Federal Reserve issued a consent order against Morgan Stanley Tuesday to address servicing and foreclosure issues from the company’s former subsidiary Saxon Mortgage Services.
The consent order requires Morgan Stanley to hire an independent consultant to review foreclosure proceedings initiated by Saxon that occurred between 2009 and 2010.
Morgan Stanley completed its sale of Saxon April 2, 2012, to Ocwen Financial and is no longer in the servicing business. In October 2011, Morgan Stanley first announced the sale of Saxon to Ocwen for base purchase price of $59.3 million.
The purpose of the review is to compensate borrowers who suffered from a wrongful foreclosure or other forms of misconduct as a result of the foreclosure process. The Fed stated that “monetary sanctions are appropriate” and that it plans to announce what those penalties will be in the cases.
According to the Fed, Saxon was ranked the 34th largest residential servicer and serviced a portfolio of more than 225,000 residential loans. The Fed stated Saxon initiated at least 60,313 foreclosure actions from January 1, 2009 to December 31, 2010.
In April 2011, the Office of the Comptroller of the Currency ordered 14 servicers to hire an independent consultant to review foreclosure cases to see if borrowers suffered financial harm due to servicing errors and other forms of misconduct.
In another separate case, federal officials and 49 state attorneys general reached a $25 billion agreement with the five largest servicers – Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally Financial – over robo-signing and other servicing issues in February of this year.
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