January 08, 2013
Feds Hand Foreclosure Relief over to Banks
by Robert Kropp
The Office of the Comptroller of the Currency and the Federal Reserve Board reach an agreement with
ten mortgage servicers that will end the Independent Foreclosure Review and instead provide $3.3
billion in direct payments to eligible borrowers.
The Independent Foreclosure Review was established by the Office of the Comptroller of the Currency
(OCC), the Office of Thrift Supervision (OTS), and the Federal Reserve Board to address
improprieties by mortgage services in foreclosure actions against homeowners. As part of the
review, independent consultants would recommend remediation for financial injuries to homeowners.
But in an agreement reached yesterday with ten mortgage servicers—a group which
includes Bank of America, Citibank, JPMorgan Chase, and Wells Fargo—regulators apparently handed
responsibility for determining the extent of fraud involved in foreclosures back to the alleged
perpetrators. The mortgage companies have agreed to pay $3.3 billion directly to eligible borrowers
and $5.2 billion in other assistance. According to a press release, "The
agreement ensures that more than 3.8 million borrowers whose homes were in foreclosure in 2009 and
2010 with the participating servicers will receive cash compensation in a timely manner."
In a statement,
Comptroller of the Currency Thomas Curry said, "It has become clear that carrying the process
through to its conclusion would divert money away from the impacted homeowners and also needlessly
delay the dispensation of compensation to affected borrowers."
The National Community Reinvestment Coalition (NCRC), an
association of more than 600 community-based organizations, expressed displeasure with the
agreement. Its President and CEO, John Taylor, said, "It is unfortunate that the OCC has abandoned
the Independent Foreclosure Review process for these banks."
"This settlement will not
settle the score," Taylor continued. "It is likely that we will now never fully know the extent of
the damage wrought on American homeowners without a case-by-case review. This settlement
unfortunately allows these banks and the government to wash their hands of that responsibility."
"Any movement towards more compensation for homeowners is a step in the right direction,"
Alys Cohen, staff attorney for the National Consumer
Law Center (NCLC), said. "However, the capped pool of cash payments is wholly inadequate in
light of the scale of the harm."
"If the reviews had been done right the first time, banks
would have been on the hook to pay far more to homeowners, even though the planned scheme fell far
short of full compensation," Cohen continued.
Last week, the House Committee on Oversight
and Government Reform wrote to the regulators, requesting a briefing on the agreement before it was
announced in order to obtain "more information about how the potential settlement amount is to be
determined in light of potential wrongdoing identified to date, how such aid may be distributed and
in what form, and what may happen to homeowner files that are still awaiting review." However,
regulators went ahead with the announcement of the settlement without providing legislators with
the requested briefing.
"I am deeply disappointed that the OCC and the Federal Reserve
finalized this settlement and effectively terminated the Independent Foreclosure Review process
before providing Congress answers to serious questions about how this settlement amount was
determined, who these funds will go to, and what will happen to other families who were abused by
these mortgage servicing companies, but have not yet had their cases reviewed," Representative
Elijah Cummings said. "I do not know what the rush was to make this settlement without answering
these key questions, and although I look forward to obtaining information about how this deal may
assist homeowners, I have serious concerns that this settlement may allow banks to skirt what they
owe and sweep past abuses under the rug without determining the full harm borrowers have suffered."