Weeks after state and federal officials said they would ensure borrowers still had the right to sue servicers even under the $25 billion mortgage settlement, the Office of the Comptroller of the Currency appears ready to follow suit.
The OCC has been at odds with the Federal Reserve Board for months over whether borrowers should be required to waive their legal rights as a condition of compensation under the independent foreclosure review being conducted by the 14 largest servicers.
But there are indications that mounting pressure from consumer groups and the broad relief of options for homeowners under the $25 billion settlement is causing the OCC to shift its position, people familiar with the review process said.
"I think that the Fed was opposed to releases generally," one person involved in the process said. "Then I think with the advocacy groups also being opposed to releases and with the attorney general settlement not having releases, I think all of those pieces have kind of brought everybody in alignment — everybody except the servicers — that they're just not going to pursue releases."
The consent orders signed by the 14 servicers last April didn't give any assurances about releases or even provide details about the specific ways that borrowers harmed by foreclosure errors should be compensated. But sources said the servicers had long expected that compensation would be coupled with some sort of waiver as a condition of any agreement.
As the servicers and their independent consultants worked to come up with a framework for remediation — a process that was expected to be finished last fall — the issue of whether to include waivers became a sticking point, much as it did in the ongoing negotiations over the $25 billion servicer settlement.
The Fed, which regulates four of the 14 servicers, told consumer groups it does not favor allowing servicers to require borrowers to waive their rights to other legal remedies as a condition of compensation. But the OCC has been open to the idea of narrow releases in certain circumstances.
At a hearing before a Senate Banking subcommittee on Dec. 13, OCC Senior Deputy Comptroller and Chief Counsel Julie Williams testified that "there could be situations depending upon the type of release that ends up being provided where it may be sensible for a servicer to seek a waiver."
"For example, if the remediation that is provided is the homeowner gets the home back, they get expenses paid, and they get some lump-sum payment from a compensation on top of that …that may be a situation where a waiver would be appropriate," Williams said.
The servicers have continued to push for the waivers, and laid out strong cases over the past few months for why there should be releases at least under some circumstances.
An OCC spokesman said last week that no final decision has been made concerning waivers in specific circumstances.
A spokeswoman for the Fed would not comment on the status of the guidance.
