In a letter to the OCC and Federal Reserve, three lawmakers criticized the regulators for their early conclusion of the Independent Foreclosure Review Process and for failing to provide a comprehensive report on the IFR and its results.
In 2011, the Fed and OCC entered consent agreements with 14 mortgage servicers over servicing and foreclosure processing practices that were found to be unsafe. Under the consent orders, the servicers were required to outline how they planned to remedy deficiencies in their processes related to loan modification, borrower communications and compliance.
The IFR was also established under the consent orders and required mortgage servicers to hire external consultants to review foreclosures between 2009 and 2010, determine whether borrowers had been the victims of abusive or illegal practices and correct the issues, if necessary.
Earlier this year, both the Fed and OCC announced numerous settlements with the mortgage servicers subject to the IFR review, resulting in termination of the case-by-case review process. Fed and OCC staff said only approximately 105,000 out of a potential 4.2 million borrower files had been reviewed when the regulators finalized $9.3 billion in settlements.
“We have raised significant concerns about the decision to conclude the IFR process before all borrower requests for review had been satisfied and randomly selected samples of eligible loan files had been reviewed,” Sen. Elizabeth Warren (D-Mass.) said in the letter, which was also signed by Reps. Maxine Waters (D-Calif.) and Elijah Cummings (D-Md.).
The lawmakers said information provided at the time of the settlements made it difficult to determine whether the amounts and terms were adequate, whether it was appropriate that the mortgage servicers decided themselves how to compensate borrowers and whether the hired consultants collected and analyzed accurate information.
Warren, Waters and Cummings pointed to previous statements by OCC Deputy Chief Counsel Daniel Stipano and Fed Chairman Ben Bernanke that the regulators would release a public report on the IFR review process.
The lawmakers requested that the OCC and Fed provide a summary of financial assistance given to borrowers; a description of information that will be released to borrowers whose files were examined in the process; referrals made to the Department of Justice; the status of servicers’ compliance with mandated action plans; and a description of information-sharing efforts between the Fed, OCC, CFPB and Office of the Monitor of the National Mortgage Settlement.
“This information is critically important to addressing the continuing foreclosure processing problems in the mortgage servicing industry,” the lawmakers said. “An August…CFPB report found that ‘sloppy account transfers,’ ‘poor payment processing’ and ‘loss mitigation mistakes’ are still harming borrowers. Although the IFR process may be over, there are still many valuable lessons to be learned from it.”