The Federal Reserve Board on Thursday released details on steps three more mortgage servicers are taking to correct deficiencies in their foreclosure practices.
The agency has been under pressure from Congress and consumer groups to disclose the action plans of the 14 financial firms that were ordered by regulators last year to fix their foreclosure processes and hire third-party consultants to investigate past errors. Two weeks ago, it released the action plans of eight servicers — including Citigroup Inc., Wells Fargo & Co. and Bank of America Corp. — and followed up this week by releasing the plans of HSBC North America Holdings Inc., Ally Financial Inc. and IMB HoldCo. LLC.
The plans, each of which are hundreds of pages long, establish detailed guidelines the servicers must follow to comply with the regulatory orders, covering such areas as board oversight, operations training and risk management. They also establish firm deadlines for meeting the orders' requirements.
The Fed and the Office of the Comptroller of the Currency issued orders in April requiring the 14 largest servicers to address deficiencies in their foreclosure practices and hire independent consultants to investigate past foreclosure errors.
"The Federal Reserve will closely follow the implementation of action plans to ensure that the financial institutions correct deficiencies and evaluate any harm that was done to homeowners in the foreclosure process in 2009 and 2010," the agency said in a Feb. 27 press release.
Along with the action plans for the three companies, the Fed also released a 64-page letter from Ernst & Young explaining how the consulting firm will handle its review of HSBC's past foreclosure practices. Among steps it intends to take to identify potential borrowers who may suffered "financial injury," Ernst & Young said it would conduct "robust borrower outreach for complaints" among segments of the population that are viewed as "higher risk."
It said in that cases where it does find that HSBC failed to follow proper foreclosure protocols, it would work with the bank to develop a remediation plan for the borrower.
In the first release of action plans, the Fed included a redacted version of an exhaustive letter from one of the consultants, PricewaterhouseCoopers, to SunTrust Banks Inc. outlining what the company's foreclosure review will entail. (The Fed regulates SunTrust's bank subsidiary.)
Similar to the letters released by the OCC, the SunTrust letter outlines Pricewaterhousecooper's responsibilities and obligations as the independent consultant.
The consulting firm said it expects to evaluate 10,748 of SunTrust's loan files, including approximately 6,000 files in which the borrower requested a review and 1,000 cases where SunTrust denied requested modifications of loans owned by the government-sponsored enterprises.
"You are engaging to provide the professional consulting services outlined below," the letter says. "We are not providing, and shall at no time provide, any legal advice or legal opinions in connection with this engagement."
Also in the first round of plans released, Citi said it planned to hire 800 new employees in its mortgage division to improve servicing processes. B of A said it plans to develop new standards for the internal audit program designed to evaluate its servicing platform. Many of the plans also include charts with detailed metrics identifying which actions have been taken, which are in progress and which have yet to be started.
The Fed's release came after a group of House Democrats sent a letter on Oct. 28 to both agencies, calling on them to publicly release information regarding the reviews, including the engagement letters. And last month, several members of Congress asked the Government Accountability Office to launch an investigation into the foreclosure review process, raising concerns about the independence and transparency of the reviews.
