The top Democrat on the House Committee on Oversight and Government Reform is again trying to get to the bottom of what was uncovered during the Independent Foreclosure Review, which was scuttled more than a year ago in favor of compensation checks. Those checks have failed to match the level of wrongdoing in many cases, according to borrower advocates.
Rep. Elijah Cummings, D-Maryland, sent a letter Thursday to committee chairman Darrell Issa, R-California, requesting a hearing on “widespread foreclosure abuses” seen in documents reviewed recently by Cummings’ staff.
The Office of the Comptroller of the Currency (OCC), one of two banking regulators overseeing the Independent Foreclosure Review (IFR), provided the documents to Cummings’ office.
“It is unclear why the regulators believed it was in the best interests of borrowers to end the IFR when high error rates were identified during preliminary reviews, and more detailed reviews had been prepared to identify the full extent of harm,” Cummings wrote in his letter to Issa.
Issa’s office has yet to respond.
The debate over why the review was scrapped is not new. It focuses on a 2011 agreement the OCC and Federal Reserve reached with 16 mortgage servicers accused of different levels of denying about 4.2 million borrowers the proper process for preventing foreclosures, including the botching of mortgage modifications which in some cases led to wrongful evictions.
Checks Started Going Out 1 Year Ago
The slow process of reviews and huge costs led federal regulators to shut down the IFR and forge the compensation agreement, which began paying out checks one year ago this month.
When regulators announced the settlement to replace the IFR in January 2013, lawmakers and consumer advocates were not convinced that the new deal was the right move, or an improvement over thorough reviews.
Cummings says the IFR consultants hired to review foreclosures identified high rates of banks charging excessive fees, failing to process requests for lower mortgage payments and illegally kicking borrowers in bankruptcy out of their homes. Cummings would not provide the confidential documents from the OCC for the media to review.
The lawmaker says that in one example, Promontory Financial found errors in 60 percent of the loan modifications performed by Bank of America. The consulting firm also uncovered similar problems in 21 percent of the cases it initially reviewed for PNC Bank, according to Cummings.
The OCC has declined to comment on Cummings letter, although the regulator acknowledged providing his office with access to the documents, according to the Washington Post.
About 3.7 million checks amounting to nearly $3.3 billion have been cashed or deposited to date as part of the IFR final agreement. In April 2013, the first wave of checks were received, with the average payout at about $865. Most people received checks for about $300.