Representative Elijah Cummings (D-Md ) wrote to Chair of the Committee on Oversight and Government Reform, Rep. Darrell Issa (R-Ca), asking for a hearing on the Fed’s and the OCC’s abrupt and premature conclusion of the Independent Foreclosure Review. Full letter here.
“Now that we have obtained copies of these documents, they confirm that some mortgage servicing companies engaged in widespread and systemic foreclosure abuses, including charging improper and excessive fees, failing to process loan modifications in accordance with federal guidelines, and violating automatic stays after borrowers filed for bankruptcy,” Cummings wrote. “It remains unclear why the regulators terminated the IFR prematurely, how regulators determined the compensation amounts servicers were required to pay under the settlement, and how regulators could claim that borrowers who were harmed by these servicers would benefit more from the settlement—including the settlement amounts paid for each error category—than by allowing the IFR to be completed.”
In his letter, Cummings requested that the Committee hold a hearing with representatives from the Federal Reserve, the Office of the Comptroller of the Currency (OCC), mortgage servicing companies, and independent consultants to address three key questions:
· Why did the Federal Reserve and the OCC terminate the IFR prematurely before its objective had been achieved?
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 consultants were poised to conduct more in-depth reviews to identify the full extent of harm.
· How did the regulators arrive at the compensation amounts in the settlement?
The settlement required banks to provide cash payments and other assistance to affected borrowers, but it is unclear what criteria were used to determine these settlement amounts, and whether these amounts were in any way related to the actual or estimated harm suffered by borrowers.
· How did the regulators determine that the amounts mortgage servicers would pay—and the amounts borrowers would receive—would be more favorable under the settlement than if the IFR had been completed?
It is unclear how regulators determined that the settlement amounts would provide a greater benefit to borrowers than if the IFR had continued until the independent consultants could report reliable data on servicer error rates.