Independent Foreclosure Review controversy revived
Lawmakers want answers by year's end
The Independent Foreclosure Review settlement that ended a massive probe into the practices of 14 mortgage servicers is still generating controversy on Capitol Hill.
This week, several lawmakers – including Reps. Maxine Waters, D-Calif., Sen. Elizabeth Warren, D-Mass., and Elijah Cummings, D-MD – sent a letter to the Office of the Comptroller of Currency and Fed Chair Ben Bernanke asking for a report on the independent foreclosure reviews — a report they've been waiting for since this past spring.
The independent foreclosure reviews originally functioned as a key part of a massive servicing settlement reached between 14 financial firms and regulators a few years back.
However, a year after the agreement, the two main regulators ended the foreclosure reviews by inking a $9.3 billion settlement with servicers on the grounds that the IFR process had become too costly and cumbersome. Instead, they settled, ending the IFR reviews with $3.6 billion in direct payments to borrowers.
But it wasn't over. Those payments generated more controversy when a small slice of the checks bounced, generating a new stream of bad publicity that was quickly remedied.
The Government Accountability Office made the situation worse, releasing its own report, saying the reviews became tainted by a lack of clarity, transparency and consistency.
All of this transpired months ago, but Sen. Warren and other members of Congress still want the 'foreclosure review information' from the OCC and Federal Reserve to determine if the settlement amounts were adequate.
In Monday’s letter, the Democratic lawmakers asked for a summary of all financial compensation received by borrowers and a description of the information discovered in borrower loan files. The members also noted that all cases of alleged criminal activity should be referred to the Department of Justice.
In response, the OCC said it does not comment on letters submitted by lawmakers, but has defended the IFR settlement in the past.
Lawmakers, on the other hand, are getting more verbal. After failing to receive the requested records, they're pushing for a data release by year's end.
"This information is critically important to addressing the continuing foreclosure processing problems in the mortgage servicing industry," the lawmakers wrote. "An August 2013 [Consumer Financial Protection Bureau] 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."
The IFR controversy is centered around numerous issues, including billions of dollars in consulting fees collected by independent consultants hired to deal with the loan files.
Several consulting groups were involved in the process, including Promontory Financial Group, which alone received nearly $1 billion to review foreclosure files from 2009 and 2010.