The Office of the Comptroller of the Currency (OCC) has ordered the country’s largest mortgage subservicer, Cenlar FSB, to address chronic risk management deficiencies the agency alleges have led to “unsafe and unsound practices.”
The OCC’s order against Cenlar, based in Ewing, N.J., requires the bank to receive written approval from the OCC to add new subservicing clients, as well as to pay dividends to shareholders, while the order is in effect, according to an agency press release Tuesday.
The OCC said it has warned Cenlar regarding risk management deficiencies related to “issue(s) identification, remediation, risk oversight, and accountability within first-line operations, including default and servicing operations and bank information technology; and internal controls and operational risk management practices, including testing of preventative control processes, self-assessment processes, and leadership and oversight of business operations.”
The OCC said the bank, which services mortgages for U.S. financial institutions and credit unions, has “failed to take timely corrective action to remediate its deficiencies and unsafe or unsound practices.”
To comply with the order, Cenlar must establish a compliance committee of at least three members, the majority of whom are directors not employed by the bank, and that committee must submit an action plan to address the deficiencies outlined by the OCC. After each quarter, starting in March 2022, the committee must submit a written progress report to the OCC detailing the results and status of corrective actions.
Within 180 days of the OCC approving the action plan, the bank’s internal audit department must complete an assessment of its progress towards implementing the plan, the order said.
Among the problems the OCC highlighted within Cenlar’s risk management structure were weak internal control policies, processes, and practices, including a lack of sufficient staff to oversee those functions.
In addition to being the largest mortgage subservicer in the county, Cenlar is also the second largest mortgage servicer in the United States. On its website, Cenlar promotes itself as delivering “higher standards of risk management,” saying: “As the only bank-regulated servicer in the nation, we are held to a higher standard of safety and soundness, and our robust compliance and regulatory management program is second to none.”
Cenlar did not respond to a request for comment.