Congresswoman Maxine Waters, Ranking Member of the House Financial Services Committee, issued a response to the Governments Accountability Office’s report on the Independent Foreclosure Review, which was conducted by the Office of the Comptroller of the Currency and the Federal Reserve in 2011 and 2012.
The GAO report, which is detailed here, found that the OCC and Fed negotiated with 16 mortgage servicers (the list of impacted servicers can be read here) for a $3.9 billion payout to distressed borrowers based on an incomplete review of the foreclosure process. The GAO report also found that the regulators established a $6 billion fund to aid in foreclosure prevention without defining specific objectives for what to do with the money.
Waters said that she is “troubled by the GAO report” because it “shows that just as the Department of Justice deliberately overstated its investigation and prosecution of mortgage fraud cases, regulators claimed $6 billion dollars of settlement payments that never truly occurred.”
Waters said that the regulators “used a nonsensical crediting system for the largest portion of the settlement,” which was meant to provide additional foreclosure relief activities to victims of “unscrupulous practices.”
In the GAO report, most of the servicers “anticipated they would be able to meet their obligations using their existing level of foreclosure prevention activity.”
Waters said she was “concerned” with these GAO findings. Waters said the report also “show(s) that the settlement was reached without adequate investigation into the harms committed by the servicers.”
Waters notes, “Many of the files did not contain complete data, making it impossible to know whether borrowers were disqualified from the possibility of the greatest cash payouts. Only a thorough review of poorly maintained or incomplete servicer files could have verified whether payments were commensurate with the harms committed.”
Waters says she urges the bank regulators to review and release loan level data to the entire eligible population of the Independent Foreclosure Review, so that individual borrowers may review their servicing files and decide whether it would be appropriate to file their own claims against servicers.
“In November 2013, my office requested that regulators make a comprehensive public report relating to the operation and settlement of the Independent Foreclosure Review,” she said. “Congress and the public have yet to receive such a report. More than a year ago, I called on Financial Services Committee Chairman Jeb Hensarling to exercise the Committee’s oversight responsibility and conduct a hearing on the IFR process. I remain disappointed that thus far he has refused to do so.
“Given the 4.4 million borrowers that may have been adversely affected, I urge him to reconsider this request.”
Waters calls the information in the IFR critical to reforming the mortgage servicing industry, which she says has been allowed to operate without adequate borrower protection controls for since the peak of the foreclosure crisis. “Regulators must act immediately to disclose data from the review, reform broken practices at the servicers, and ensure that borrowers receive the information they need to right these wrongs,” she concluded.