U.S. Sen. Elizabeth Warren sparred with prudential regulators on Capitol Hill, suggesting the recent $9.3 billion independent foreclosure review settlement between regulators and mortgage servicers failed to account for how many illegal foreclosures potentially impacted American borrowers.
Warren grilled Richard Ashton, deputy general counsel for the Federal Reserve Board of Governors, and Daniel Stipano, deputy chief counsel with the Office of the Comptroller of the Currency, during a Senate Banking Committee hearing on the use of independent contractors in the foreclosure review process.
Both regulatory agencies said the decision to shut down the massive independent foreclosure review process came after regulators realized the complexity of the mission. They decided instead on a deal to settle with borrowers in a timely and streamlined fashion.
“In retrospect, it is clear that our approach under the IFR process did not serve the agency’s objectives which were, first and foremost, to compensate borrowers in a timely manner for the financial harm they suffered from faulty foreclosure practices,” said Stipano in prepared remarks.
“Our failure to fully appreciate the breadth, scale, and complexity of the reviews and to define a comprehensive and effective project plan at the outset hampered the process.”
Sen. Warren argued that she remains unconvinced that the $9.3 billion settlement accurately accounts for the number of homeowners harmed by foreclosures. And if it does, she is looking for proof from the regulatory agencies. Specifically, proof in the form of recorded data or records from the completed foreclosure reviews and related files. This way, Warren said Congress could evaluate the process and probe into the findings on certain servicers. Here is a report released on the settlement, with some data.
At the hearing, Warren appeared to be upset about the remaining unknowns.
“Your agency said they arrived at this (settlement) number, in part, on the fact that servicers may have broken the law in 6.5% of the cases,” Warren asked the panelists. “I assume if you believe servicers had broken the law in 90% of the cases, then you would have settled for a much larger amount of money?”
Ashton, in response, said such data would be considered, but continually noted the process taken was used to avoid what had become a burdensome review that would eventually delay payouts to all borrowers.
Warren then questioned the calculations that led to the $9.3 billion settlement with regulators to end the reviews and compensate borrowers.
“Your staff admitted to us that the number is based on a random sample of the cases reviewed at the time you shut down the process,” Warren asked the regulators.
In response, Ashton said the settlement was reached to address concerns over delays and quickly compensate borrowers.
But the Senator took issue with that characterization, noting it’s difficult to justify minimal payouts in some cases when the review process is incomplete and it’s unknown the extent of what issues may remain in all the files.
Warren also pressed regulators on whether they know on “a bank-by-bank basis, the number of families that were illegally foreclosed on” based on reviews already completed when the settlement was finalized.
The Senator also probed for answers on why all of the information has not been revealed to members of Congress.
Ashton noted that data could be provided to “Congress through the appropriate process,” but added “it’s confidential supervisory information … but that does not mean we won’t at some point release the information.”
Warren added, “So if someone believes that they have been (wrongfully) foreclosed against, will they still have a right under the settlement to bring a lawsuit against the bank?”
Ashton responded, yes, which prompted Warren to ask: “Will you be giving them the information that is in your possession on how the banks illegally foreclosed against them?”
To that, Ashton said, it’s a decision we haven’t yet made. He noted the information is confidential, but that doesn’t mean it will not be released at some point.