Federal Regulators Agree to Monetary Settlement With 10 Servicers In Lieu of Independent Foreclosure Review
On January 7, the OCC and the Federal Reserve Board announced that 10 of the 14 mortgage servicers subject to consent orders issued in April 2011 regarding alleged improper servicing and foreclosure practices agreed in principle to resolve those allegations by paying borrowers $3.3 billion directly and providing $5.2 billion in borrower assistance through loan modifications and forgiveness of deficiency judgments. For the settling servicers, the agreement ends the costly and ineffective Independent Foreclosure Review program required by the consent orders, pursuant to which the banks were to compensate borrowers for any financial injury and/or improper foreclosure identified by third-party consultants through a case-by-case loan file audit process or in response to borrower requests for review. The OCC states that more than 3.8 million borrowers are expected to receive compensation ranging from hundreds of dollars up to $125,000, without having to take any action to become eligible. The exact payout will depend on the type of alleged servicing error, and the regulators expect that borrowers will be contacted by the end of March with payment details. The regulators continue to seek similar agreements with the remaining companies subject to the 2011 consent orders.