The US Federal Reserve has issued a punishing court order to Morgan Stanley, as it prepares to fine the bank over the use of automated ‘robo signing’ of documents relating to foreclosures for struggling US mortgage payers. It ordered the bank to make significant process, data and systems improvements.
The court order issued this week concerns the Saxon business, which Morgan Stanley has sold to mortgage servicing group Ocwen Financial. The Fed said Morgan Stanley retained responsibility for the impact of Saxon’s actions. Saxon had issued over 225,000 residential mortgage loans.
Robo-signing typically involves employees of mortgage servicing companies automatically signing off foreclosure papers without checking them, in the interests of fast processing the papers.
The practice was allegedly supported by the Mortgage Electronic Registration Systems (MERS), which…
Keller Rohrback’s investigation focuses on alleged abuses by Bank of America and JPMorgan Chase, among others, such as: failing to pay for hazard insurance out of the borrower’s escrow funds, charging homeowners for unnecessary insurance, backdating policies providing coverage retroactively, utilizing their own subsidiaries to provide the hazard insurance, and purchasing policies from companies who share fees or profits with the servicers—often without disclosing this information to the borrower. Keller Rohrback is also investigating the force-placed insurance practices of the following mortgage loan servicers:
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