Report Highlights Status of Independent Foreclosure Review Payment Agreement

WASHINGTON —  The Office of the Comptroller of the Currency (OCC) today released a status report on Independent Foreclosure Review (IFR) Payment Agreements that required the large mortgage servicers to provide $3.9 billion in payments to 4.4 million eligible borrowers and $6.1 billion in other loss mitigation and foreclosure prevention assistance.

Because servicers entered agreements at different times, regulators directed the creation of four separate settlement funds.  The OCC report focuses on Qualified Settlement Fund 1, which includes payments from Aurora, Bank of America, Citibank, HSBC, JPMorgan Chase, MetLife Bank, PNC, Sovereign, SunTrust (regulated by the Federal Reserve Board), U.S. Bank, and Wells Fargo.  As of January 24, 2014, Qualified Settlement Fund 1 had disbursed 3,948,415 checks, totaling $3,385,814,432.  Of those checks, 3,280,458 (83 percent), totaling $2,903,932,623 (86 percent), have been cashed or deposited as of April 8, 2014.

The OCC also regulates EverBank, which entered a similar payment agreement in August 2013.  Payments to eligible borrowers serviced by EverBank will begin in the second quarter of 2014 (Qualified Settlement Fund 4).

The Federal Reserve Board regulates Goldman Sachs and Morgan Stanley (Qualified Settlement Fund 2), and GMAC Mortgage (Qualified Settlement Fund 3).

In addition to direct payments to eligible borrowers, the amended consent orders obligated covered servicers to provide $6,061,000,000 in other foreclosure prevention assistance.  Aurora, EverBank, GMAC Mortgage, MetLife Bank, Morgan Stanley, and PNC Bank met their obligations by paying collectively an additional $92 million to the qualified settlement funds or to U.S. Department of Housing and Urban Development (HUD)-approved nonprofit organizations providing borrower counseling or education services.  Of this amount, $63 million went to the qualified settlement funds and $29 million went to HUD-approved borrower counseling and education.  Bank of America, Citibank, HSBC, JPMorgan Chase, Sovereign, U.S. Bank, and Wells Fargo submitted foreclosure prevention assistance activities for credit under the amended consent orders on 16,362 mortgages with a total unpaid balance of $4,045,726,584 through January 24, 2014.  Data presented here reflect the servicers’ submissions, but regulators have not validated submissions nor have they awarded credit toward the obligations under the amended consent orders.

In general, independent consultant findings regarding the reviews that were completed or had a significant portion of the work finished at the termination of the IFR were consistent with the deficiencies and weaknesses examiners identified during the 2010 horizontal review of large and midsized mortgage servicers.  Besides those deficiencies and weaknesses, the findings identified additional loss mitigation related errors. Errors and process weaknesses identified most often by the consultants during the IFR included:

• Improper loan modification denials and untimely execution, aggravated by rapidly increasing modification request volume without adequate staffing and changing program guidelines during 2009 and 2010;
• Untimely communication and inadequate recognition of bankruptcy protection by servicing departments;
• Violations of Servicemembers Civil Relief Act (SCRA)  protections; and
• Fee errors arising from servicer process weaknesses, especially servicers’ lack of oversight of external parties who provided services such as legal representation and property management.

All servicers covered by the consent orders continue to take action to correct deficiencies in mortgage servicing and foreclosure processes as directed by the OCC and FRB enforcement actions.  While servicers report that much of that work is complete, federal examiners are in the process of verifying and testing that work.  This report does not discuss the status of corrective actions required by the original consent orders.

Related Link

• Foreclosure-Related Consent Orders Status Report: Observations, Payments, and Foreclosure Prevention Assistance, April 2014 (PDF)