Sovereign Bank, an affiliate of Spain's Grupo Santander, is one of 14 financial institutions in the United States being sanctioned for misconduct and negligence in mortgage loan servicing and foreclosure practices, several U.S. government agencies said.
The investigation was conducted by the Federal Reserve, Office of Comptroller of the Currency (OCC), FDIC and the Office of Thrift Supervision (OTS).
The latter entity ordered Sovereign, Aurora, EverBank and OneWest Bank to take corrective actions in servicing and foreclosure processes and each must submit plans acceptable to the Federal Reserve. So far, no penalties have been announced against any of the 14 cited institutions.
The investigation of Sovereign was begun in late 2010 and, according to the OTS, the bank - "without admitting or denying" that reasons exist for the OTS to initiate an administrative action - accepted the order from the supervisory agency.
Meanwhile, the Federal Reserve said on its Web page that the 14 institutions, which represent 68 percent of the mortgage market, demonstrated a "pattern of misconduct and negligence related to deficient practices in residential mortgage loan servicing and foreclosure processing."
The other banks being sanctioned by the Fed are Bank of America Corporation; Citigroup Inc.; Ally Financial Inc.; HSBC North America Holdings, Inc.; JPMorgan Chase & Co.; MetLife, Inc.; The PNC Financial Services Group, Inc.; SunTrust Banks, Inc.; U.S. Bancorp; and Wells Fargo & Company.
The Fed also said that the "deficiencies" at these institutions "represent significant and pervasive compliance failures and unsafe and unsound practices."
The investigation found that the banks' deficiencies included the filing of inaccurate affidavits and other documentation in foreclosure proceedings, inadequate oversight of attorneys and other third parties involved in the foreclosure process, inadequate staffing and training of employees and the failure to effectively coordinate the loan modification and foreclosure process to ensure effective communications to borrowers seeking to avoid foreclosures.
Although the sanctions announced on Thursday did not include any mention of fines, they could well be imposed in the future since the Fed said that it believes that in these cases "monetary sanctions are appropriate" and such penalties will indeed be announced.
The measure requires that the cited banks establish a variety of obligatory programs and undergo reviews conducted by independent firms of their loan processing procedures and their oversight of risk management, audit and compliance programs.
Fines and other corrective measures could also result from an investigation being conducted by 50 state attorneys general and the Justice Department.
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