Big Banks' Mortgage Units -- Still Failing Customers -- Face New Restrictions

SAN FRANCISCO, CA - APRIL 23:  A protestor holds a sign during a demonstration outside of the Wells Fargo headquarters on Apr
SAN FRANCISCO, CA - APRIL 23: A protestor holds a sign during a demonstration outside of the Wells Fargo headquarters on April 23, 2013 in San Francisco, California. A few dozen protestors with the group Alliance of Californians for Community Empowerment staged a demonstration outside of the Wells Fargo headquarters to support those who have lost their homes to foreclosure because of the bank's predatory lending practices. The protest coincides with Wells Fargo's annual shareholder meeting that is being held in Salt Lake City. (Photo by Justin Sullivan/Getty Images)

Remember that time the nation's largest banks engaged in fraud and deceptive lending to fuel Wall Street's insatiable appetite for dodgy investments backed by home mortgages?

Remember how in the aftermath of the economic collapse, after the banks received massive taxpayer bailouts, some of the same financial institutions totally botched the handling of an epochal wave of foreclosures that their actions had helped to bring about? And how untold thousands of people lost their homes as a result? And how federal regulators chose to ignore warnings about the looming crisis, then looked the other way as mortgage companies misapplied homeowner payments, lost piles of paperwork, and generally made it next to impossible for borrowers to take advantage of (flawed) government-sponsored refinancing programs meant to stem the tide of foreclosures?

Perhaps you recall that as part of a legal deal struck in 2011 with the Office of the Comptroller of the Currency, more than a dozen major mortgage companies paid supposedly independent auditors to review the foreclosure documents of aggrieved borrowers?

This is all ringing a bell, right?

How about that time the OCC abruptly scrapped the whole program amid cost overruns and allegations of bank employees interference?

Were you, perchance, aware that a key condition of that 2011 legal agreement required the mortgage companies to overhaul how they "service," or manage, home loans, to prevent a return to those abuses?

Sure, you've been paying attention.

But did you know that 99.7 percent of all checks that the banks mailed to consumers as part of a subsequent settlement were for $6,000 or less?

So then would you be at all surprised to learn that now, four years later, some of the key players still haven't lived up to the terms of the deal, and homeowners are still suffering as a result?

No? Me neither.

On Wednesday, the OCC announced that six banks that manage home loans -- EverBank, HSBC, JPMorgan Chase, Santander Bank, U.S. Bank and Wells Fargo -- haven't implemented all the reforms they promised to make as part of the 2011 deals.

As punishment, the regulator has imposed new restrictions on the banks' mortgage departments, limiting their ability to acquire residential servicing rights in some circumstances, and forcing them to seek OCC approval before hiring senior officers in their mortgage servicing and compliance departments.

The restrictions vary, with Wells Fargo and HSBC strictly prohibited from certain types of new business acquisition, while the other banks must first seek OCC approval.

Wells Fargo, the OCC said in a new consent order, "continues to engage in unsafe and unsound practices." Among the bank's points of "noncompliance," the regulator said in regulator-speak, is its failure to ensure "effective communication with borrowers, both oral and written."

According to the OCC, Wells Fargo still has yet to ensure that each borrower is matched with a single customer service representative at the bank to handle their modification request or foreclosure -- a basic first step to ending the cycle of confusion, lost paperwork and endless hours on the phone that many homeowners have endured while speaking with a succession of uninformed bank employees.

Mike Heid, the president of Wells Fargo Home Mortgage, said in a statement that the bank has "implemented significant changes to our mortgage servicing operations and achieved compliance with major elements of the original Consent Order."

"We will continue to work with the OCC to address the remaining items, and we have an action plan in place to complete that work in the coming," Heid's statement said.

In response to a question about assigning customers to single points of contact, a bank spokesman said that Wells Fargo began that process in 2010, and that the bank is now "waiting on final validation of recent changes we made in response to new direction provided by the OCC late in 2014."

In the original consent orders, the mortgage companies agreed to 98 separate "actionable items," or reforms, related to how they service loans. Of the banks called out Wednesday by the OCC for not meeting this pledge, HSBC apparently has the farthest to go.

The bank failed to implement 45 reforms, the OCC said, including those that address more than a dozen procedural failings related directly to how it manages customer accounts.

Did you know that HSBC's procedures for handling consumer complaints; for ensuring payments are promptly applied; for making sure the bank isn't foreclosing at the same time it's helping with a mortgage modification; for training staff to handle mortgage delinquencies; for communicating with borrowers about loan modification requests "within a reasonable period of time" before a foreclosure sale is commenced -- were all found lacking by the OCC?

"We are actively addressing the remaining issues, and we will continue to work closely with the OCC to ensure we fully comply with all requirements of the order," said HSBC spokesman Rob Sherman.

And if you need some positive news to hold on to until the next quiz: Citibank and PNC Bank received passing grades from the regulator, and the 2011 consent orders were terminated.