The Federal Reserve Board has ordered Morgan Stanley (MS) to retain an independent consultant to evaluate foreclosures initiated by former subsidiary Saxon Mortgage Services in 2009 and 2010. Saxon, which intends to shut down its processing center in Forth Worth, is accused of engaging in a “pattern of misconduct and negligence” related to residential mortgage servicing and foreclosure processing. The order mandates that Morgan Stanley compensate homeowners who were hurt financially because of certain deficiencies, including wrongful foreclosures.
Per the Fed, Saxon initiated at least 6,313 foreclosures against homeowners during the years cited above. Regarding certain actions, Saxon is accused of failing to confirm ownership and other information, not properly notarizing signatures, failing to implement proper controls and oversight, and neglecting to adequately staff and fund its operations to handle the increase in foreclosures.
Morgan Stanley had bought Saxon for $706 million during the housing bubble. Earlier this month, the financial firm completed its sale of the mortgage lender to Ocwen Financial of Florida. In the wake of the sale, Morgan Stanley is no longer involved in mortgage servicing. However, should the financial firm reenter this market while the Consent Order is still in effect, it will have to execute better risk-management, corporate governance, compliance, servicing, borrower communication, and foreclosure practices similar in quality to what mortgage servicers who had to abide by enforcement actions in 2011 had to implement.
Monetary sanctions are expected in this case. Morgan Stanley has acknowledged responsibility for making any civil monetary penalty that can be assessed against Saxon over this alleged misconduct.
It was in 2010 that attorenys general from the 50 states announced that they would begin probing bank foreclosure practices following reports that manufactured or faulty documents were used to foreclose on residences. Last September, the Fed arrived at a similar action against Goldman Sachs (GS) and Litton Loan Servicing LP. Litton was accused of robo-signing foreclosure documents, leading to concerns that some borrowers may have been wrongfully removed from their homes. Robo-signing is the term used for company officials vouch for foreclosure documents without ensuring their accuracy.
Goldman Sachs was ordered to execute an independent review of foreclosures made by Litton in 2009 and 2010 as a result of this “pattern of misconduct and negligence.” So that the sale of Litton to Ocwen would be approved, Goldman Sachs agreed to pay penalties and write down $53 million of mortgages loans in New York.
Our Texas securities fraud lawyers represent institutional and individual investors with stockbroker fraud claims against broker-dealers, brokers, investment advisers and others in the financial industry. Contact Shepherd Smith Edwards and Kantas, LTD, LLP today.
Morgan Stanley to Pay for Some US Foreclosures, AP/ABC News, April 3, 2012
Goldman Sachs Sets Pact With Fed, N.Y. to Complete Litton Sale, Bloomberg Businessweek, September 1, 2011
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