JPMorgan Chase & Co. and Bank of America Corp. told regulators they were straining last year to hire and keep enough qualified people who could clear a backlog of foreclosure complaints.
JPMorgan, the largest U.S. bank by assets, vowed to expand training after its review found that the mortgage-servicing unit “struggled to absorb rapid staffing growth and, in many cases, hired representatives with little or no home lending industry experience.” Bank of America, ranked second, said compliance operations were understaffed as of midyear 2011 and that some people lacked the skills or stature needed to do their jobs.
The assessments, released yesterday by the Federal Reserve, were contained in action plans submitted after U.S. banks were ordered last April to clean up foreclosures and mortgage servicing. The order followed a deluge of borrower complaints about lost paperwork, broken promises and missed deadlines that cost some of them their homes. The accord compels the 14 largest servicers to repay homeowners for any losses tied to the errors.
The documents describe how firms will strengthen communications with borrowers, limit certain foreclosures and bolster compliance programs, the Fed said in a statement.
“Examiners found unsafe and unsound processes and practices in residential mortgage loan servicing and foreclosure processing at a number of supervised institutions” during reviews from November 2010 to January 2011, the Fed said. The central bank will “closely follow” implementation of the plans to ensure deficiencies are fixed, it said.
In documents dated Dec. 8, New York-based JPMorgan said lack of training contributed to high error rates. The bank started a new training program for its default underwriting staff, and after 2,900 employees attended an average of 8 hours of instruction, the average score on a test improved to 92.2 percent from 81.7 percent.
Lauren Francis, a JPMorgan spokeswoman, didn’t comment. A slide show scheduled to be presented to investors today said the bank’s “modification and refinance programs continue to be expanded” and that servicing practices have been “largely remediated.”
Bank of America, which had been the biggest U.S. home lender and largest mortgage servicer during the boom years, said in a response dated July 12 that the company was improving oversight and that it would “make every effort” to ensure operations were properly staffed, managed and supervised. “We appreciate fully the seriousness of the issues we face,” the bank said.
Risk units in home loan and legacy asset servicing business were “straining existing resources,” according to the Bank of America’s documents, portions of which were redacted. The lender “faces a particularly significant challenge in fielding a team whose members have the requisite knowledge and stature to perform risk-management oversight effectively.”
The company planned to increase risk professionals by more than 30 percent to 236 by the end of 2011, and by more than 40 percent in compliance to 308 people. Some compliance staff still acted in a “partnership” or “consultative” role and required training to ensure their independence, according to the report.
Rick Simon, a spokesman for the Charlotte, North Carolina-based company, said he couldn’t immediately comment. Chief Executive Officer Brian T. Moynihan is seeking to limit additional costs from faulty loans and foreclosures after the 2008 takeover of Countrywide Financial Corp. helped saddle the bank with about $42 billion in expenses.
Wells Fargo & Co., the biggest U.S. home lender, is looking to hire a new chief compliance officer, according to its action-plan documents. The hiring must be completed before the company can conduct more analysis of its staffing and compliance functions, according to the documents, which didn’t give a deadline. One passage in the files relating to the executive was redacted.
Wells Fargo is also looking to fill an open position for an executive in charge of managing the risk associated with hiring third-party vendors, according to the documents. The bank said it is creating a “central unit” to oversee outside firms conducting work for the company and that a new policy for hiring and managing those companies was expected to be completed by the end of January.
Tim Marrinan, Wells Fargo’s chief compliance officer, stepped down from the role at the end of December and plans to retire from the company at the end of March, according to Ancel Martinez, a company spokesman. The search for his replacement continues, Martinez said.
Citigroup, the third-biggest U.S. bank by assets, has filled 880 additional full-time positions “to strengthen the operating model,” said Sean Kevelighan, a spokesman for the New York-based firm. He declined to comment on how many of the positions were filled by new employees. The lender also added several senior managers, including a chief customer officer.
“We are committed to working with our regulators to further strengthen our foreclosure processing programs and meeting the consent order requirements,” Kevelighan said. The company identified and undertook changes to its foreclosure processes in 2009, which included “significantly reinforcing the size and training of our staff,” he said.