Rep. Elijah E. Cummings is not happy that the Federal Reserve Board and the Office of the Comptroller of Currency settled with 10 mortgage servicers this week, putting an end to the Independent Foreclosure Review that the government required the firms to organize.
"I am deeply disappointed that the OCC and the Federal Reserve finalized this settlement and effectively terminated the Independent Foreclosure Review process before providing Congress answers to serious questions about how this settlement amount was determined, who these funds will go to, and what will happen to other families who were abused by these mortgage servicing companies, but have not yet had their cases reviewed," said Cummings, ranking member of the House Committee on Oversight and Government Reform, in a statement following the settlement announcement Monday.
The review process was set up in 2011 after several federal agencies determined that 16 mortgage companies (the government is working to settle with the remaining firms) had used "unsafe and unsound practices" in mortgage loan servicing and foreclosure processing. The companies were instructed to hire independent consultants to evaluate, on a case-by-case basis, whether borrowers lost money because of their bad behavior.
By the end of last year, individuals who suspected problems or errors in their home's foreclosure proceeding were supposed to request a review by these consultants, who determined an individual's right to compensation. About 84,000 homeowners in Maryland were potentially eligible for an independent review, but a small percentage of them actually requested an assessment of their case.
Monday's settlement — with mortgage servicers including Bank of America, Citibank, SunTrust, PNC and Wells Fargo — requires the companies to provide $3.3 billion in "direct payment to eligible borrowers" and $5.2 billion in other assistance, such as mortgage modifications.
The settlement allows the servicers to terminate the Independent Foreclosure Review "and replace it with a broader framework allowing eligible borrowers to receive compensation significantly more quickly," the OCC said in a statement.
More than 3.8 million borrowers whose homes were in foreclosure in 2009 and 2010 with the 10 settling servicers will receive compensation "ranging from hundreds of dollars up to $125,000, depending of the type of possible servicer error," according to the OCC.
Borrowers will be compensated whether or not they filed a request for an independent review. The government expects borrowers will be contacted by the end of March with details about payment.
Comptroller of Currency Thomas J. Curry said the Independent Foreclosure Review process needed to go because "carrying out the process through to its conclusion would divert money away from the impacted homeowners" and delay disbursement of funds. Money the servicers would have continued to spend to pay the independent review consultants would take away from deserving borrowers, the OCC said.
Cummings didn't directly contest that assessment in his statement, but expressed frustration that a bipartisan request earlier this month — for a briefing before any new agreement with servicers was announced — was ignored.
"I do not know what the rush was to make this settlement without answering these key questions, and although I look forward to obtaining information about how this deal may assist homeowners, I have serious concerns that this settlement may allow banks to skirt what they owe and sweep past abuses under the rug without determining the full harm borrowers have suffered," Cummings said.
A spokesman for the OCC, Bryan Hubbard, declined to address the request for a Congressional briefing on the settlement.