Federal Banking Regulators Assess $65 Million Penalty Against Default Management Company

ScaleOn January 24, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve, and the Office of the Comptroller of the Currency announced a $65 million fine assessed against a default management services company.

The company’s predecessor had consented to a cease and desist order in 2011, stemming from allegations that it had engaged in unsafe or unsound practices in providing default management services to financial institutions.  Specifically, the agencies alleged that the company had engaged in unsafe and unsound banking practices in connection with document execution services that it performed on behalf of financial institutions.  The agencies alleged that the company executed affidavits that were filed in state courts and federal bankruptcy proceedings without personal knowledge or review; executed assignments of mortgages containing inaccurate information that were then recorded and filed in court; executed mortgage-related documents on behalf of servicers without the authority to do so; recorded mortgages that were not properly notarized; and failed to have proper internal controls and oversight over its document execution services.

Pursuant to that order, the company was required to retain an independent consultant to review any document execution services that it had provided to servicers between 2008 and 2010, including services used in foreclosure and bankruptcy proceedings.  The agencies recently amended that order, assessing a $65 million penalty against the company and terminating provisions concerning the company’s review of its document execution services.