Reuters reported earlier this afternoon that the Federal Reserve is targeting Morgan Stanley due to negligence in their mortgage servicing unit.The Fed is seeking monetary damages and alterations in how mortgages are serviced. According to Reuters, Morgan Stanley has acknowledged that it will be responsible for monetary penalties assessed by the Fed.
“Morgan Stanley sold its mortgage servicing business Saxon Mortgage Services Inc. to Ocwen Financial Corp in October for $59.3 million. The sale of Saxon assets was completed yesterday.
Under the agreement, the Fed required Morgan Stanley to hire an outside consultant to comb through foreclosure actions that were pending in 2009 and 2010.”
A main issue, according to the Fed, was that Saxon completed foreclosures despite lacking documentation that confirms that ownership was in order. With the additional increase in foreclosures, the staff was too small to handle such a high volume. The Fed wants to make sure that borrowers were not incorrectly removed from their homes due to “improper documentation.”