Attached files
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8-K - FORM 8-K - US BANCORP \DE\ | c15205e8vk.htm |
EX-99.1 - EXHIBIT 99.1 - US BANCORP \DE\ | c15205exv99w1.htm |
Exhibit 99.2
UNITED STATES OF AMERICA
BEFORE THE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C.
BEFORE THE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C.
Docket No. 11-027-B-HC | ||
In the Matter of |
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U.S. BANCORP |
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Minneapolis, Minnesota |
CONSENT ORDER
WHEREAS, U.S. Bancorp, Minneapolis, Minnesota (USB), a registered bank holding company, owns
and controls U.S. Bank National Association, Cincinnati, Ohio and U.S. Bank National Association
ND, Fargo, North Dakota (collectively, the Banks), national banks that operate U.S. Bank Home
Mortgage and U.S. Bank Consumer Finance (collectively, the Mortgage Divisions);
WHEREAS, USB, through the Mortgage Divisions, indirectly engages in the business of servicing
residential mortgage loans for the Banks, U.S. government-sponsored entities (the GSEs), and
various investors;
WHEREAS, with respect to the residential mortgage loans it services, the Mortgage Divisions
initiate and handle foreclosure proceedings and loss mitigation activities involving nonperforming
residential mortgage loans, including activities related to special forbearances, repayment plans,
modifications, short refinances, short sales, cash-for-keys, and deeds-in-lieu of foreclosure
(collectively, Loss Mitigation);
WHEREAS, as part of a horizontal review of various major residential mortgage servicers
conducted by the Board of Governors of the Federal Reserve System (the Board of Governors), the
Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency (OCC), and
the Office of Thrift Supervision, examiners from the Federal Reserve Bank of Minneapolis (the
Reserve Bank) and the OCC have reviewed certain residential mortgage loan servicing and
foreclosure-related practices at the Mortgage Divisions;
WHEREAS, the Banks and the OCC have entered into a consent order to address areas of weakness
identified by the OCC in residential mortgage loan servicing, Loss Mitigation, foreclosure
activities, and related functions;
WHEREAS, in the consent order, the OCC has made findings, which the Banks neither admitted nor
denied, that there were unsafe or unsound practices with respect to the manner in which the
Mortgage Divisions handled various foreclosure and related activities. The OCCs findings also
raised concerns that USB did not adequately assess the potential risks associated with these
activities;
WHEREAS, it is the common goal of the Board of Governors, the Reserve Bank, and USB that USB
maintains effective corporate governance and oversight over the consolidated organization,
including the establishment and maintenance of robust internal audit, risk management, and
compliance programs to ensure that the consolidated organization operates in a safe and sound
manner and in compliance with the terms of mortgage loan documentation and related agreements with
borrowers, all applicable state and federal laws (including the U.S. Bankruptcy Code and the
Servicemembers Civil Relief Act), rules, regulations, and court orders, as well as the Membership
Rules of MERSCORP, Inc. and MERS, Inc. (collectively, MERS), servicing guides with GSEs or
investors, and other contractual obligations, including those with the Federal Housing
Administration and those required by the Home Affordable Modification Program (HAMP), and loss
share agreements with the Federal Deposit Insurance Corporation (collectively, Legal
Requirements);
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WHEREAS, it is the further goal of the Board of Governors, the Reserve Bank, and USB that USB
and its subsidiaries effectively manage their legal, reputational, and compliance risks;
WHEREAS, the board of directors of USB at a duly constituted meeting adopted a resolution
authorizing and directing Richard K. Davis to enter into this Consent Order to Cease and Desist (the
Order) on behalf of USB and consenting to compliance with each and every provision of this Order
by USB and its institution-affiliated parties, as defined in sections 3(u) and 8(b)(3) of the
Federal Deposit Insurance Act, as amended (the FDI Act) (12 U.S.C. §§ 1813(u) and 1818(b)(3)),
and waiving any and all rights that USB may have pursuant to section 8 of the FDI Act, including,
but not limited to: (i) the issuance of a notice of charges; (ii) a hearing for the purpose of
taking evidence on any matters set forth in this Order; (iii) judicial review of this Order; (iv)
contest the issuance of this Order by the Board of Governors; and (v) challenge or contest, in any
manner, the basis, issuance, validity, terms, effectiveness or enforceability of this Order or any
provision hereof.
NOW, THEREFORE, before the filing of any notices, or taking of any testimony or adjudication
of or finding on any issues of fact or law herein, and without this Order constituting an admission
by USB or any of its subsidiaries of any allegation made or implied by the Board of Governors in
connection with this matter, and solely for the purpose of settling this matter without a formal
proceeding being filed and without the necessity for protracted or extended hearings or testimony,
it is hereby ordered by the Board of Governors that, pursuant to sections 8(b)(1) and (3) of the
FDI Act (12 U.S.C. §§1818(b)(1) and 1818(b)(3)), USB and its institution-affiliated parties shall
cease and desist and take affirmative action as follows:
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Source of Strength
1. The board of directors of USB shall take appropriate steps to fully utilize USBs financial
and managerial resources, pursuant to section 225.4(a) of Regulation Y of the Board of Governors
(12 C.F.R. § 225.4(a)), to serve as a source of strength to the Banks, including, but not limited
to, taking steps to ensure that the Banks comply with the Consent Order issued by the OCC regarding
the Banks residential mortgage loan servicing activities.
Board Oversight
2. Within 60 days of this Order, the board of directors shall submit to the Reserve Bank a
written plan to strengthen the boards oversight of USBs enterprise-wide risk management (ERM),
internal audit, and compliance programs concerning the residential mortgage loan servicing, Loss
Mitigation, and foreclosure activities conducted through the Mortgage Divisions. The plan shall, at
a minimum, address, consider, and include:
(a) Policies to be adopted by the board of directors that are designed to ensure that the ERM
program provides proper risk management oversight with respect to Mortgage Divisions residential
mortgage loan servicing, Loss Mitigation, and foreclosure activities, particularly with respect to
compliance with the Legal Requirements, and supervisory standards and guidance of the Board of
Governors as they develop;
(b) policies and procedures to ensure that the ERM program provides proper risk management of
independent contractors, consulting firms, law firms, or other third parties who are engaged to
support residential mortgage loan servicing, Loss Mitigation, or foreclosure activities or
operations, including their compliance with the Legal Requirements and USBs internal policies and
procedures, consistent with supervisory guidance of the Board of Governors;
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(c) steps to ensure that USBs ERM, audit, and compliance programs have adequate levels and
types of officers and staff dedicated to overseeing Mortgage Divisions residential mortgage loan
servicing, Loss Mitigation, and foreclosure activities, and that these programs have officers and
staff with the requisite qualifications, skills, and ability to comply with the requirements of
this Order; and
(d) steps to improve the information and reports that will be regularly reviewed by the board
of directors or authorized committee of the board of directors regarding residential mortgage loan
servicing, Loss Mitigation, and foreclosure activities and operations, including compliance risk
assessments and the status and results of measures taken, or to be taken, to remediate deficiencies
in residential mortgage loan servicing, Loss Mitigation, and foreclosure activities, and to comply
with this Order.
Risk Management
3. Within 60 days of this Order, USB shall submit to the Reserve Bank an acceptable
written plan to enhance its ERM program with respect to its oversight of residential mortgage loan
servicing, Loss Mitigation, and foreclosure activities and operations. The plan shall be based on
an evaluation of the effectiveness of USBs current ERM program in the areas of residential
mortgage loan servicing, Loss Mitigation, and foreclosure activities and operations, and
recommendations to strengthen the risk management program in these areas. The plan shall, at a
minimum, be designed to:
(a) Ensure that the fundamental elements of the risk management program and any enhancements
or revisions thereto, including a comprehensive annual risk assessment, encompass residential
mortgage loan servicing, Loss Mitigation, and foreclosure activities;
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(b) ensure that the risk management program complies with supervisory guidance of the Board of
Governors, including, but not limited to, the guidance entitled, Compliance Risk Management
Programs and Oversight at Large Banking Organizations with Complex Compliance Profiles, dated
October 16, 2008 (SR 08-08/CA 08-11); and
(c) establish limits for compliance, legal, and reputational risks and provide for regular
review of risk limits by appropriate senior management and the board of directors or authorized
committee of the board of directors.
Compliance Program
4. Within 60 days of this Order, USB shall submit to the Reserve Bank an acceptable
written plan to enhance its enterprise-wide compliance program (ECP) with respect to its
oversight of residential mortgage loan servicing, Loss Mitigation, and foreclosure activities and
operations. The plan shall be based on an evaluation of the effectiveness of USBs current ECP in
the areas of residential mortgage loan servicing, Loss Mitigation, and foreclosure activities and
operations, and recommendations to strengthen the ECP in these areas. The plan shall, at a minimum,
be designed to:
(a) Ensure that the fundamental elements of the ECP and any enhancements or revisions thereto,
including a comprehensive annual risk assessment, encompass residential mortgage loan servicing,
Loss Mitigation, and foreclosure activities;
(b) ensure compliance with the Legal Requirements and supervisory guidance of the Board of
Governors; and
(c) ensure that policies, procedures, and processes are updated on an ongoing basis as
necessary to incorporate new or changes to the Legal Requirements and supervisory guidance of the
Board of Governors.
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Audit
5. Within 60 days of this Order, USB shall submit to the Reserve Bank an acceptable
written plan to enhance the internal audit program with respect to residential mortgage loan
servicing, Loss Mitigation, and foreclosure activities and operations. The plan shall be based on
an evaluation of the effectiveness of USBs current internal audit program in the areas of
residential mortgage loan servicing, Loss Mitigation, and foreclosure activities and operations,
and shall include recommendations to strengthen the internal audit program in these areas. The plan
shall, at a minimum, be designed to:
(a) Ensure that the internal audit program encompasses residential mortgage loan servicing,
Loss Mitigation, and foreclosure activities;
(b) periodically review the effectiveness of the ECP and ERM with respect to residential
mortgage loan servicing, Loss Mitigation, and foreclosure activities, and compliance with the Legal
Requirements and supervisory guidance of the Board of Governors;
(c) ensure that adequate qualified staffing of the audit function is provided for residential
mortgage loan servicing, Loss Mitigation, and foreclosure activities;
(d) ensure timely resolution of audit findings and follow-up reviews to ensure completion and
effectiveness of corrective measures;
(e) ensure that comprehensive documentation, tracking, and reporting of the status and
resolution of audit findings are submitted to the audit committee; and
(f) establish escalation procedures for resolving any differences of opinion between
audit staff and management concerning audit exceptions and recommendations, with any disputes to be
resolved by the audit committee.
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Approval, Implementation, and Progress Reports
6. (a) USB shall submit written plans that are acceptable to the Reserve Bank within the
applicable time periods set forth in paragraphs 3, 4, and 5 of this Order.
(b) Within 10 days of approval by the Reserve Bank, USB shall adopt the approved plans. Upon
adoption, USB shall implement the approved plans and thereafter fully comply with them.
(c) During the term of this Order, the approved plans shall not be amended or rescinded
without the prior written approval of the Reserve Bank.
(d) During the term of this Order, USB shall revise the approved plans as necessary to
incorporate new or changes to the Legal Requirements and supervisory guidance of the Board of
Governors. The revised plans shall be submitted to the Reserve Bank for approval at the same time
as the progress reports described in paragraph 7 of this Order.
7. Within 30 days after the end of each calendar quarter following the date of this Order, the
board of directors of USB or authorized committee of the board of directors shall submit to the
Reserve Bank written progress reports detailing the form and manner of all actions taken to secure
compliance with the provisions of this Order and the results thereof. The Reserve Bank may, in
writing, discontinue the requirement for progress reports or modify the reporting schedule.
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Notices
8. All communications regarding this Order shall be sent to:
(a) | Ms. Diann G. Townsend Assistant Vice President Federal Reserve Bank of Minneapolis 90 Hennepin Avenue Minneapolis, Minnesota 55401 |
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(b) | Mr. Richard K. Davis Chairman, President & CEO U.S. Bancorp Mail Station: BC-MN-H23D 800 Nicollet Mall Minneapolis, Minnesota 55402-4302 |
Miscellaneous
9. The provisions of this Order shall be binding on USB and its institution-affiliated parties
in their capacities as such, and their successors and assigns.
10. Each provision of this Order shall remain effective and enforceable until stayed,
modified, terminated or suspended in writing by the Reserve Bank.
11. Notwithstanding any provision of this Order, the Reserve Bank may, in its sole discretion,
grant written extensions of time to USB to comply with any provision of this Order.
12. The provisions of this Order shall not bar, estop or otherwise prevent the Board of
Governors, the Reserve Bank, or any federal or state agency or department from taking any further
or other action affecting USB, any of its current or former institution-affiliated parties, USBs
successors or assigns, or any of USBs subsidiaries.
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13. Nothing in this Order, express or implied, shall give to any person or entity, other than
the parties hereto, and their successors hereunder, any benefit or any legal or equitable right,
remedy, or claim under this Order.
By
Order of the Board of Governors effective this 13th day of April, 2011.
U.S. BANCORP | BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM |
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By:
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/s/ Richard K. Davis | By: | /s/ Jennifer J. Johnson | |||||
Richard K. Davis | Jennifer J. Johnson | |||||||
Chairman, President & CEO | Secretary of the Board |
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