Thursday, October 21, 2010

Sarbox at your cervix, sir.

Sarbanes-Oxley meets servicer execs
Sarbox, enacted in 2002 in response to corporate fraud at firms like Enron, mandates increased personal liability for senior managers. And we should be clear here — it doesn’t seem to be Sarbanes-Oxley per se that could come back to haunt mortgage servicer execs accused of shoddy practices, but rather Sarbox-type agreements they may have signed as part of the US Treasury’s various housing programmes.

Servicing executives were required by the Treasury Department to sign Sarbanes-Oxley-type agreements by Sept. 30 certifying they were in compliance with the Making Home Affordable Program. Some servicing executives initially balked

it does state that the “servicer is in material compliance with, and certifies that all services have been materially performed in compliance with all applicable federal, state and local laws, regulations, regulatory guidance, statutes, ordinances codes and requirements.”

The issue then is that some mortgage servicer execs could face personal lawsuits brought under the False Claims Act — if they guaranteed that their own internal servicing processing satisfied that applicable law compliance requirement.

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