The Department of Housing and Urban
Development released five reports from its Office of Inspector General on Tuesday
based on reviews of the foreclosure and claims processes of the five largest
Federal Housing Administration (FHA) mortgage servicers. OIG conducted the audit of Bank of America, Wells Fargo Bank,
CitiMortgage, JPMorgan Chase, and Ally Financial, Inc, after allegations were made
in the fall of 2010 that national mortgage servicers were engaged in questionable
foreclosure practices involving foreclosure mills and robo-signing of sworn
documents in thousands of foreclosures.
For each of the five servicers OIG
conducted a review of a wide variety of documents such as personnel files,
servicing and foreclosure processes, Congressional testimony and court
documents regarding those processes, FHA claims documents, and foreclosure
affidavits. They also interviewed
servicer management and staff and those of vendors involved in foreclosures and
The five separate reports generally
reached the same conclusions. First, the
servicers did not establish effective control over their foreclosure
processes. The affiants (a person who
signs an affidavit and attests to its truthfulness before a notary public) routinely
certified that they had personal knowledge of the documents they signed without
actually referring to source documents or verifying the accuracy of the foreclosure
information. Affiants admitted to having
signed large numbers of documents each day. One Ally employee, for example, claimed to
have signed up to 400 documents a day and 10,000 per month. The affiants had neither the work histories
nor training to hold the titles they held.
Notaries did not always witness the actually signing of documents and
routinely notarized hundreds of documents each day.
The servicers also did not follow HUD
requirements for properties foreclosed on in judicial states and may have
conveyed improper titles to HUD because it did not establish control
environments which followed the requirements.
It was discovered that Citi did not have
written processes in place for signing documents prior to November 2009 nor did
it track documents during the period of the OIG review. OIG said its investigation of Citi was
hampered by this lack of records and it had to rely on personnel interviews for
much of its information.
OIG found that in many instances
supervisors at each servicer were aware of the violations of procedures while
they were happening. The Chase report
for example states "During Interviews, Chase's operations supervisors
acknowledged that they routinely signed and certified that they had personal
knowledge of the contents of documents ... without reviewing the source
documents referred to in the affidavits."
Chase also outsourced its document execution process to First American.
A Bank of America employee said her
direct supervisor, a vice president, was aware and approved of the industry
standard (to have documents notarized outside the presence of the signer) being
followed. She assumed her supervisor's
boss would have approved and been aware of the same. A Bank of America manager
said she read the first paragraph of a document, and then located the place she
needed to sign. She spent 1-1/2 to 2
hours per day on signing documents and two to three minutes on each.
OIG provided the shipping log kept by
one Bank of America manager showing that she had signed 67,908 documents (93 documents per day) and
notarized 1,390 during a two year period.
Records show she had notarized her own signature on two of the
OIG also found that some affidavits it
reviewed contained errors in the mathematics required in judicial foreclosure
states. Bank of America was found to
have calculated per diem charges inconsistently even within the same document
and there were instances of incorrect legal descriptions of properties conveyed
to HUD. Out of 36 affidavits for
foreclosures that were reviewed for the Chase inquiry, the bank was unable to
provide documentation for the amount of the borrowers' indebtedness listed on
the affidavits for 32 and of the remaining four, OIG found the amounts to be
inaccurate in three.
The findings of OIG in their reviews
were used by the Department of Justice in reaching the recent $25 billion
settlement with the servicers.
The five full audits can be found here.