Comptroller of the Currency Thomas J. Curry said today that it was right of regulators to end the delayed and unproductive “independent foreclosure review” in favor of a settlement with more than a dozen lenders over improper or wrongful foreclosures against 4.2 million borrowers.
Scuttling the reviews has drawn criticism from consumer advocates and lawmakers who say the true depth of the wrongdoing may never come to light. And that the agreed compensation structure – from hundreds of dollars to $125,000 – is probably not enough.
But Curry said that mortgage servicers had spent nearly $2 billion on the consultants’ review through November 2012, without a dollar going to any wronged borrower, before the decision was made to scrap the reviews of foreclosures initiated in 2009 and 2010.
“We were still not ready to compensate the first borrower,” said Curry in a speech before the Women in Housing and Finance group.
“So in late 2012, at the same time we were raising awareness of the Independent Foreclosure Review, we also came to the realization that maintaining our course would significantly delay compensation without appreciable benefit to the affected borrowers. I decided we needed to change direction, and the Federal Reserve came to the same conclusion.”
Curry also said that the settlement’s compensation structure will provide more relief to borrowers than any amount that the reviews would have yielded.
The final realization that the initial review was not going to produce sufficient results came after a long awareness campaign to get affected borrowers to request a review.
Outreach efforts by the OCC and the Fed included a $35 million campaign with multiple letters; advertising in print, radio, and television in target communities; public service announcements; and grass-roots efforts by community groups.
As a result, more than 500,000 borrowers requested a review. That’s far short of the estimated 4.2 million borrowers thought to be victims.
“It was not a decision I made lightly. I knew that the servicers, independent consultants, community groups, and even some members of Congress had made a personal and concerted effort to support the process and make it work as well as possible,” Curry said.
“But in the end, changing course was the right thing to do, for borrowers, for servicers, for the federal banking system, and for the housing markets.”
Curry said that the nearly $10 billion settlement with 13 lenders will get “more money to more people more quickly.”
The modified consent orders will provide $3.6 billion in payments to 4.2 million eligible borrowers and $5.7 billion in additional foreclosure prevention assistance, such as mortgage principal reductions and refinancing into low rates.
“That’s the largest cash payout of any foreclosure-related settlement to date,” Curry said.
Borrowers will be contacted and regulators expect checks will start to go out by the end of March. Under the old process, reviews would have almost certainly continued into 2014, almost three years after the original consent orders were signed, Curry said.
The comptroller acknowledged the criticism over ending the reviews.
“The best available information we have suggests the cash payout alone is several times the potential payout had the reviews run their course,” Curry said. “And the $5.7 billion in other assistance will result in meaningful relief to borrowers still struggling to keep their homes, and this assistance can make a real difference for those families and their communities.”
Curry was sworn in on April 9, 2012 as overseer of the Office of the Comptroller of the Currency. The OCC supervises more than 2,000 national banks and federal savings associations.
For more information on the settlement, go to independentforeclosurereview.com.
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