The Fed, OCC Keep An Eye on Servicers
The watch list of servicers supervised by the Federal Reserve and The Office of the Comptroller of the Currency is not that long, but the number and types of requirements they need to abide to is and includes independent foreclosure reviews whose application deadline is ticking.
In merely 30 seconds, using 85 words the new OCC radio public service advertisement clip aims to increase public awareness about the opportunity to receive an Independent Foreclosure Review, which the agency initially announced in November 2011.
Consumers who “believe they suffered financial injury” due to foreclosure process errors by a mortgage firm in 2009 or 2010 can request a free review and even receive compensation if they fill out and send the related forms by April 30, 2012.
Over 4 million people received letters explaining how to do just that.
More specific information is also available online at independentforeclosurereview.com and all information is distributed in both English and Spanish.
The rule applies to 14 of the nation’s largest banks including Bank of America, Chase, Citibank, CitiFinancial, Citi Mortgage, Country-Wide, EMC, Freedom Financial, GMAC Mortgage, HFC, HSBC, IndyMac Mortgage Services, MetLife Bank, National City, PNC, Sovereign Bank, Sun-Trust Mortgage, U.S. Bank, Wachovia, Washington Mutual, and Wells Fargo.
Independent consultants who work under the direction of the federal regulators must conduct the reviews. It is a fertile ground for forensic loan audit service providers and special servicers who will help determine whether borrower claims have merit and whether they should receive compensation for errors or other problems during their home foreclosure process.
Situations the OCC recognizes as “possible causes of financial injury” include: The mortgage balance higher than what the borrower actually owed at the time of the foreclosure action; Mistakes in the calculation of fees charged, processed or applied; The mortgage was foreclosed even though the borrower complied with a loan modification agreement, was under bankruptcy protection, or was a military member whose Servicemembers Civil Relief Act protections were violated.
It is unclear how many will even respond to the letters mailed to potentially eligible borrowers with request-for-review forms. The application process “may take several months” to complete and return, the agency said.
The goal is to avoid unsafe and unsound mortgage servicing and foreclosure practices especially among the large, federally regulated mortgage servicers.
To ensure that happens the Fed is calling for more action in the mortgage servicing market whose improvement appears to be key to the housing market and a larger economic recovery.
The Fed’s recent 26-page report provides several steps designed to provide overall stability. “It is our intention to provide a framework for thinking about certain issues and tradeoffs that policymakers might consider,” chairman Ben Bernanke stated in the report’s introduction letter sent to House of Representatives Committee on Financial Services.
Bernanke and other Fed governors have increased their pressure on Congress calling for effective action and measures to revive the economy. Due to an average 33% drop in housing prices since their 2006 peak the country suffered nearly $7 trillion in household wealth losses that combined the unprecedented supply of foreclosed homes on the market, servicers’ failure to deal with capacity demands and compliance resulted in cases of “negligent servicing practices," the report said. Currently 12 million homeowners are “under water.”
The Fed paper outlined steps that policymakers can take on to improve the situation based on programs that have already been underway such as the Home Affordable Refinance Program. It means more housing related regulatory updates could be on the way.