The manner in which the Office of the Comptroller of the Currency (OCC) and Federal Reserve handled the Independent Foreclosure Review process has been called into question by a U.S. Government Accountability Office (GAO) report.
‘Regulators said that coordinating among foreclosure review participants was challenging, and consultants said that the reviews were complex,’ the GAO says. ‘In spite of regulators' steps to foster consistency, broad guidance and limited monitoring reduced the potential usefulness of data from consultants and increased risks of inconsistency. For example, GAO found that guidance was revised throughout the process, resulting in delays. Other guidance did not specify key sampling parameters for the file reviews, and regulators lacked objective monitoring measures, resulting in difficulty assessing the extent of borrower harm.
‘Good planning and collecting objective data during monitoring provide a basis for making sound conclusions,’ the GAO continues. ‘Without using objective measures to assess sampling or comparing review methods across consultants, regulators' ability to monitor progress toward achievement of foreclosure review goals was hindered.’
The GAO also faulted the regulators for their inconsistent attempts at keeping the public updated on the review's progress. The report notes that some borrowers who submitted requests for a review waited nearly a year before receiving any update on their inquiries
‘Although regulators released more information than is typically associated with consent orders, limited communication with borrowers and the public adversely impacted transparency and public confidence,’ the GAO says. ‘To promote transparency, regulators released redacted engagement letters and guidance on remediation. In addition, OCC released two interim progress reports. However, some stakeholders perceived gaps in key information and wanted more detailed information about how the reviews were carried out. Regulators stated they considered publicly releasing additional information but expressed concerns that releasing detailed information risked disclosure of confidential or proprietary information.’
The OCC and the Federal Reserve abruptly halted the Independent Foreclosure Review in January and replaced the process with a settlement involving 11 servicers; three other servicers who declined to sign the settlement are still under the review process. The regulators' decision to push for a settlement instead of completing the review process has drawn criticism from some members of Congress, including a pair of Democrats – Sen. Elizabeth Warren of Massachusetts and Rep. Elijah Cummings of Maryland – who insinuated that the regulators were shielding ‘criminal activity.’