Lawmakers Ask for More Details on Abandoned Foreclosure Review
By: Esther Cho
Although the Independent Foreclosure Review (IFC) has concluded after regulators reached an $8.5 billion foreclosure settlement with 10 banks, questions still remain concerning the abandoned foreclosure review process and the terms for the current settlement.
In the search for more answers, three lawmakers recently wrote letters to the Office of the Comptroller (OCC) and the Federal Reserve.
Sen. Elizabeth Warren (D-Massachusetts) and Rep. Elijah Cummings (D-Maryland) sent a joint letter dated January 31 to the OCC and the Fed requesting specific information, including the results of all performance reviews and reports from servicers and independent contractors hired to review borrower files.
The letter also requested documents completed by the Fed or the OCC that shows the total amount of settlement funds paid to each independent contractor hired by the mortgage servicers who were subject to the consent orders first issued in 2011.
In addition, the letter asked for a breakdown of borrowers who requested a review by gender, race, zip code, and property value; average time each independent contractor required to complete a review of a borrowers profile; and the number of reviews independent contractors initiated, as well as how many of those files included unsafe or unsound practices.
The letter requested that the documents be provided no later than February 22, 2013.
The letter stressed the importance of disclosing additional information, asserting public confidence in the settlement will only be obtained through transparency.
“Public confidence in the banking system has been badly undermined by a widespread concern that large financial institutions are not held fully to account when they break the rules-and that consumers are not sufficiently compensated,” the letter stated.
The letter also addressed the new method to compensate borrowers, which does not require a review process.
“It also appears that borrowers whose homes were in foreclosure in 2009 or 2010 will not receive compensation based on any specific harm they suffered, but rather on the basis of determinations made by the Federal reserve, the OCC, and mortgage servicers regarding the general characteristics of their loans and the level of remediation to which borrowers with such general loan characteristics should be entitled,” the lawmakers wrote.
Separately, Rep. Maxine Waters (D-California) wrote a letter to the regulators over the IFR. In the letter, Waters also questions the methodology behind compensating all “eligible” borrowers.
“Many questions remain about why the IFR was cancelled, how your agencies went about replacing it with a negotiated settlement, and how the 4.4 million estimated eligible universe borrowers of borrowers will be evaluated for harm and compensated,” she stated in the letter.
Since final details of the settlement are still being negotiated, Waters’ letter requested specific provisions for the settlement, including an independent monitor, a minimum amount for principal reductions, and an escalation process for homeowners. She also urged for foreclosure prevention to be a priority for eligible borrowers who are still in their homes.
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