InfoBytes Blog
OCC applies heightened risk governance standards to mortgage servicer
Recently, the OCC published Interpretive Letter #1180 addressing the application of heightened risk governance standards under 12 C.F.R. Part 30, Appendix D, OCC Guidelines Establishing Heightened Standards (Guidelines) to a supervised bank. Specifically, the OCC determined that the bank’s operations were highly complex and presented a heightened risk. This determination was based on information provided by the Supervisory Office, which concluded that the bank’s operations, including significant mortgage servicing activities, warranted application of the Guidelines to the bank. “The Guidelines provide that a covered institution should establish and adhere to a written risk governance framework to manage and control its risk-taking activities,” the OCC stated, adding that the Guidelines “also provide minimum standards for an institution’s board of directors to oversee the risk governance framework.” In the interpretive letter, the OCC stated that it had notified the bank last December that it was considering exercising its reservation of authority to apply the Guidelines; however, the bank responded that application of the Guidelines was not appropriate at that time. The bank is expected to comply with the Guidelines by February 29, 2024.
As previously covered by InfoBytes, last October the OCC issued a consent order against the bank for allegedly maintaining inadequate risk management controls related to its servicing and default servicing activities. The OCC asserted that the bank had previously been informed about the alleged risk management deficiencies and did not take timely corrective action. Under the terms of the consent order, the bank was required to take comprehensive corrective measures, including developing and implementing internal controls that are “commensurate with the types and complexity of risks associated with all transactions the [b]ank executes.”