Lawmakers request more transparency in foreclosure settlement
In an attempt to boost transparency, two lawmakers requested documents related to the $8.5 billion foreclosure settlement intended to compensate homeowners who allegedly experienced improper foreclosures.
Back in April 2011, the Federal Reserve System and the Office of the Comptroller of the Currency issued consent agreements with 14 banks regarding improper practices between the banks and foreclosed upon homeowners. Under this agreement, the banks were forced to present an Independent Foreclosure Review process wherein borrowers who faced foreclosure in 2009 or 2010 could request a file review if they believed they were subjected to unsound practices.
However, on Jan. 7 of this year, the Federal Reserve and the OCC decided upon a new settlement, which called for a majority of the 14 banks to pay $3.3 directly to eligible borrowers and $5.2 billion in loan modifications and forgiveness. Under the new settlement, the Independent Foreclosure Review ceased and case-by-case reviews were no longer possible.
Less than one month after she was named to the Senate Banking Committee, Sen. Elizabeth Warren joined forces with Rep. Elijah Cummings, both Democrats, to dig a little deeper.
On Jan. 31, Sen. Warren and Rep. Cummings sent a letter to the Federal Reserve and the OCC requesting the following: the results of all IFR performance reviews by the Federal Reserve or the OCC; documents complied by the Federal Reserve or the OCC indicating the amount of settlements funds paid to independent contractors; and the total number of reviews of borrowers filed initiated by each of the contractors as well as the number of borrower files in which unsound practices were found.
In their letter, Sen. Warren and Rep. Cummings stated, "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. It is critical that the OCC and the Federal Reserve disclose additional information about the scope of the harms found to establish confidence in the sufficiency and integrity of the settlement."
Sen. Warren and Rep. Cummings requested the documents and information as soon as possible, but no later than Feb. 22, 2013.
HousingWire reached out to the OCC, who declined to comment on the letter.