Alert June 26, 2012

Federal Banking Agencies Release Financial Remediation Framework

The OCC and the FRB released the Financial Remediation Framework to be used by independent consultants making remediation recommendations to servicers in connection with independent foreclosure reviews, stemming from the April 2011 enforcement actions against the nation’s largest servicers. The agencies also extended the deadline for eligible borrowers to request a free review of their foreclosures until September 30, 2012.

Using the Framework, the independent consultants will make recommendations to the mortgage servicers regarding remediation, and servicers will prepare remediation plans for approval by the agencies. The Framework details 13 categories of errors and remedies, which are determined based on whether the foreclosure is in process or complete. The 13 error categories include: violations of the Servicemembers Civil Relief Act; foreclosing on borrowers who were not in default; various violations related to modifications, modification applications, and forbearance agreements; foreclosing on borrowers covered by bankruptcy stays; lack of standing; failure to provide legally sufficient notice; and other errors causing financial injury. Monetary remediation amounts vary by category from $500 to $125,000.  In connection with the Framework, the agencies also released FAQs. Click here for the OCC press release and here for the FRB announcement.