Three influential lawmakers on Thursday called for bank regulators to disclose more details of the $8.5 billion foreclosure abuse settlement reached earlier this month and to reveal what happened during the case-by-case review program it abruptly replaced.
In a letter to the Office of the Comptroller of the Currency and the Federal Reserve, Sen. Elizabeth Warren (D-Mass.) and Rep. Elijah Cummings (D-Md.) wrote that "additional transparency" was necessary to ensure the confidence necessary "to speed recovery in the housing markets." They asked regulators to turn over the results of the performance reviews of the independent contractors hired to examine the loan files, as well as detailed information about the reviews' preliminary results, to determine the extent of the harm to the 500,000 people who applied to the program.
In a separate letter, Rep. Maxine Waters (D-Calif.) called the sudden end of the foreclosure reviews "troubling" and asked that an independent monitor be named to oversee the new deal.
Under the foreclosure settlement, announced Jan. 7, 11 large mortgage companies, including the biggest banks -- JPMorgan Chase, Wells Fargo and Bank of America -- agreed to distribute $3.3 billion in cash payments to homeowners who received a foreclosure notice between 2009 and 2010. The lenders pledged an additional $5.2 billion to loan modifications and other programs meant to prevent future foreclosures.
The agreement comes on top of a settlement reached between five banks, 49 states and the federal government in 2012 to resolve alleged document forging and mortgage management, or "servicing," abuses. It replaces a key piece of an earlier 2011 agreement known as the Independent Foreclosure Review.
Bank regulators initially described that review as giving homeowners who believed their mortgage company made a mistake or error during the course of their foreclosure, such as an overcharge or a botched loan modification, a chance to have an independent consultant review their case and award financial compensation of up to $125,000.
Those foreclosure reviews, which began in earnest in the spring of 2012, were troubled from the start. As The Huffington Post previously reported, contractors hired to review loans were poorly or inconsistently trained and it wasn't always clear whether they were sufficiently independent from bank influence. Bank of America, for example, hired thousands of temporary workers to do preliminary loan reviews -- work that many assumed would be done by Promontory Financial, the outside consultant. Many of these former contract employees said that the process was so compromised by mistakes and misconduct that the results of the reviews were not reliable.
As part of their request for information, Cummings and Warren asked for documents indicating the number of reviews completed as of Jan. 7, the number of files in which "unsafe or unsound" practices were found and the amount of remediation that contractors had determined those borrowers should receive.
Cummings is the ranking member on the House Committee on Oversight and Government Reform, while Warren is a long-time champion of financial reform.
Waters, the ranking member on the House Committee on Financial Services, requested that the regulators report demographic and other data to determine how the $3.3 billion is distributed. She asked that homeowners be permitted to appeal decisions if they think their payment is improper. She also asked regulators to prioritize preventing avoidable foreclosures among the subset of those eligible to receive a settlement payment. Regulators have said that the mortgage companies will begin contacting homeowners in March.
Waters's concerns echo those of housing activists, and even former foreclosure review contractors. Regulators said that about 4 million people whose homes received a foreclosure will get some payment through the settlement, starting at $250 and topping out at $125,000. But with the review process eliminated, they say, it's impossible to separate the deserving from those who aren't.
It's also unclear, they say, whether the $8.5 billion total payment figure fairly represents the harm caused by the banks and other mortgage companies. To that end, Waters also asked for an explanation of how the settlement was reached.
An OCC spokesman said the agency does not comment on Congressional correspondence.
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