Critics of the payout schedule released by bank regulators for eligible borrowers are especially concerned with a wide disparity between those foreclosure victims who sought an independent review and those who did not.
The difference: Those who requested a review are getting twice as much compensation in most cases.
However, a very critical report from the Government Accountability Office made public last week on the initial Independent Foreclosure Review points out many problems with the regulators’ outreach process that included communications with borrowers who made or attempted to make requests for reviews.
“In letters to OCC (Office of the Comptroller of the Currency) and the Federal Reserve, consumer groups indicated that these borrowers were frustrated by the lack of information on their particular file review,” the GAO report said.
The report says that the OCC and the Federal Reserve acknowledged the importance of transparency in the foreclosure review process, but that “the absence of timely and useful communications at certain stages of the process — for individual borrowers as well as the general public — hindered transparency and undermined public confidence in the processes and results.”
According to the new payout framework released Tuesday by regulators, borrowers who requested a foreclosure review are assigned a payout twice as big in seven out of the 12 categories.
In two other categories, borrowers who requested a review get $500, compared to $300 for non-requesters.
For example, if a mortgage servicer completed a foreclosure on a borrower who was performing all requirements of a written trial-period plan, then the borrower gets a $50,000 payment — but only if the individual requested a review. A borrower falling under the same category gets $25,000 if the borrower did not seek a review.
Only about 11 percent of the 3.9 million borrowers on the payout schedule actually sought a foreclosure review.
Office of the Comptroller of the Currency spokesman Bryan Hubbard told the Palm Beach Post that borrowers who applied to the original program got a bigger payout because they were expecting an independent consultant to review their case.
“The regulators determined that these borrowers should be compensated at a higher rate to acknowledge the efforts they made to request a review,” Hubbard said.
The Independent Foreclosure Review, which was initiated in 2011 lacked strong, focused and consistent guidance by banking regulators as they tried to uncover the depth of errors or wrongdoing in foreclosure actions against 4.2 million borrowers in 2009 and 2010 — many of whom lost their homes, the GAO report concluded.
By January of this year, regulators opted to enter into consent orders with 13 mortgage servicers, many of them represented by the largest U.S. banks, including JPMorgan Chase, Bank of America, Wells Fargo and Citibank. This was done to expedite compensation to eligible borrowers, regulators have said.