OCC Sanctions Subservicer Cenlar for Poor Risk Controls

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On October 26, 2021, the Office of the Comptroller of the Currency (OCC) issued a consent order against Cenlar FSB, a large mortgage subservicer.  The OCC bases its action on Cenlar’s failure to establish effective internal controls and risk management practices related to its mortgage servicing and subservicing activities.  The OCC found that after these failings were brought to Cenlar’s attention, “[t]he bank [] failed to take timely corrective actions to remediate its deficiencies and unsafe or unsound practices[.]”

The order requires Cenlar to take corrective actions to address deficiencies identified by the OCC, implement internal controls, and develop risk management practices appropriate to Cenlar’s mortgage subservicing operation size and Cenlar’s risk profile.  In particular, the order requires Cenlar (i) to develop an effective default operations program concerning loss mitigation, foreclosure, and claims activities; (ii) to implement controls regarding preventative processes, self-assessment processes, and leadership and oversight of business operations; and (iii) to develop a bank information technology control program.

The order also requires Cenlar to receive no supervisory objection from the OCC before adding new subservicing clients and prior to declaring or paying dividends to shareholders while the order is effective.  The OCC asserts that these requirements will limit excessive growth and prioritize remediation. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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