Alert February 19, 2013

OCC Chairman Discusses Enforcement of Foreclosure Consent Orders

In remarks made before the Women in Housing and Finance, Thomas J. Curry, the Comptroller of the Currency, discussed developments in the enforcement of the foreclosure consent orders, which required that 97 separate corrective actions be taken by 14 of the largest servicers and the independent review of the mortgage servicers’ foreclosures begun or completed in 2009 and 2010. Mr. Curry noted that 93 percent of corrective actions, including employee training, establishing controls to prevent dual tracking, and improving communications with borrowers, had already been taken or "stood up." However, Mr. Curry acknowledged that similar progress had not been made with the Independent Foreclosure Review.

Mr. Curry noted that the IFR was designed to identify and compensate borrowers who suffered financial harm as a result of foreclosures that violated federal and state law. According to Mr. Curry, once it became clear that progress was slow, as evidenced by the $2 billion spent on the IFR by November 2012, without a single borrower being compensated, he, along with the FRB, determined to change course, resulting in modified consent orders that required $3.6 billion in direct payments to 4.2 million eligible borrowers and $5.7 billion in foreclosure prevention assistance. He noted that "the new approach will get more money to more people more quickly," with payouts expected to begin by the end of March. According to Mr. Curry, if the IFR continued, the process would have continued into 2014.

In discussing the amended consent orders, Mr. Curry noted that the $5.7 billion amount should be viewed along with the remainder of the consent orders, which address foreclosure prevention and loss mitigation activities. Mr. Curry also noted that the deficiencies in foreclosure practices served as justification for the new compensation approach, which has some concerned that compensation will go to borrowers that suffered no harm. Mr. Curry also stated that the amended consent orders are being finalized and will be made public soon.