Alert May 13, 2014

GAO Issues Report on Independent Foreclosure Review

The GAO released its third and final report reviewing the Independent Foreclosure Review, an evaluation of the foreclosure practices of several mortgage servicers required by the consent orders entered into with the OCC and the FRB in 2011. The GAO’s previous report concluded that the complexities of the foreclosure review process and limited regulator guidance and monitoring may have impeded the ability of the OCC and the FRB to achieve the goals of the Independent Foreclosure Review (see April 16, 2013 Alert). Throughout 2013, the OCC and the FRB amended the consent orders with several mortgage servicers largely ending the Independent Foreclosure Review and requiring cash payments to borrowers (see e.g., January 10, 2013 Alert and March 5, 2013 Alert).

This report addresses several aspects of the amended consent orders: (1) the factors that were considered during the negotiations over the financial penalties associated with the consent order and regulators’ goals for such payments; (2) the objectives of the foreclosure prevention actions and the effectiveness of regulator design and oversight of the actions and (3) regulator information-sharing and transparency with respect to the independent foreclosure review files and consent order processes. After conducting its analysis, the GAO found that the final negotiated amount of cash payments to borrowers fell within a “reasonable range.” The GAO also found that regulators did not establish specific objectives for foreclosure prevention actions and recommended that the OCC and the FRB “define testing activities to oversee foreclosure prevention principles and include information on processes in public documents.”