As part of a US$25 billion settlement between several large banks and U.S. authorities, the U.S. Federal Reserve Board announced Thursday that it is levying almost US$800 million in sanctions against the banks for their mortgage servicing and foreclosure practices.
The Fed said that it has reached an agreement in principle with the five banks (Bank of America Corp., Citigroup Inc., Ally Financial, Inc., JP Morgan Chase & Co., and Wells Fargo & Co.) that will see them face US$766.5 million in monetary sanctions for their unsafe and unsound processes and practices in mortgage servicing and foreclosure processing. JP Morgan is taking the biggest hit, with a US$275 million penalty; followed by Ally Financial at US$207 million; BofA with US$175.5 million; US$87 million for Wells Fargo; and just US$22 million against Citigroup.
In agreeing to issue the monetary sanctions, the Fed is acting in conjunction with a comprehensive settlement agreed in principle between the five banks, state attorneys general, and the Department of Justice. That settlement also requires the banks to provide US$25 billion in payments and other designated types of monetary assistance and remediation to residential mortgage borrowers.
The Fed says that the deficiencies in mortgage servicing and foreclosure processing, which were identified by examiners during reviews conducted from November 2010 to January 2011, led to formal enforcement actions issued against the institutions on April 13, 2011. The actions issued in April required the banks to, among other things, correct their deficiencies in mortgage loan servicing and foreclosure processing; and to improve holding company oversight of these functions.