A standoff has developed between a group of Democratic lawmakers and bank regulators over the release of shelved results from the Independent Foreclosure Review, which yielded a blanket $9.3 billion settlement — minus any details as to the extent of wrongdoing by mortgage servicers.
The lawmakers have sent a letter to Federal Reserve Chairman Ben Bernanke and Comptroller of the Currency Thomas Curry, challenging the decision by their staff not to provide any documents from the scuttled reviews.
Staff from the regulatory agencies claimed these documents are the “trade secrets” of mortgage servicing companies and should be withheld even from members of Congress.
The reason given by the regulators, according to the lawmakers: releasing the documents can be interpreted as a waiver of regulatory authority to withhold proprietary business information from the public.
The letter to the regulators came from Sen. Elizabeth Warren, D-Massachusetts, a member of the Senate Committee on Banking, Housing and Urban Affairs, and Rep. Elijah E. Cummings, D-Maryland, ranking member of the House Committee on Oversight and Government Reform.
In the letter, dated April 10, Warren and Cummings write: “As regulators, you identified systemic and widespread abuses two years ago, and concealing important information about these violations limits our ability to fulfill our responsibility to conduct oversight over the actions of mortgage servicing companies and to develop legislation to protect our constituents from further abuse.”
The initial request from Warren and Cummings on January 31, 2013 sought the detailed results of the Independent Foreclosure Review, “such as the number of improper foreclosures, the amount of inflated fees, or the extent of abusive practices by each mortgage servicer.”
On Tuesday, the regulators’ staff refused to provide any documents that would identify wrongdoing by any specific bank, Warren and Cummings said.
The latest letter from the lawmakers calls this decision a “mistake.”
The April 10 letter: “We strongly believe that documents should not be withheld from any Member of Congress based on the flawed argument that illegal activity by banks is somehow their proprietary business information. Breaking the law is not a corporate trade secret.”
Meanwhile, at a hearing before the Senate Banking Committee Thursday, Warren and Sen. Sherrod Brown, D-Ohio, were clearly unhappy with the answers lawmakers received about the program during heated questioning of Daniel P. Stipano, deputy chief counsel, Office of the Comptroller of the Currency, and Richard Ashton, deputy general counsel, Board of Governors of the Federal Reserve.
Warren, a longtime consumer advocate before running for the Senate, asked many of her questions about the January settlement ending the foreclosure reviews for 13 mortgages servicers, including the largest U.S. banks. That agreement will start paying out $3.6 billion in checks to nearly 4 million homeowners Friday as compensation for shoddy or wrongful foreclosures in 2009 or 2010. More than a half-million or so applied for a foreclosure review with a specific complaint. But most borrowers will receive less than $1,000 each.
“If you had believed that the banks had broken the law in 90 percent of cases, would you have settled for more money?” Warren asked Ashton, a top lawyer at the Fed. “Doesn’t it matter how many homeowners were victims of illegal activities by their bank?”
“Our priority was to get cash to borrowers,” Ashton responded.
Read More on the Independent Foreclosure Review:
»» Payout Disparity: Many Who Requested Reviews Getting Twice as Much
»» Lawmakers Seek Updates on Foreclosure Payouts, Other Assistance
»» Foreclosure Review Payouts: Most are in $500 to $6,000 Range