Waters presses for more information on end of foreclosure program

By Vicki Needham - 02/19/13 06:16 PM ET

A senior House Democrat is pressing federal regulators for additional information as to why they shut down a foreclosure examination program.

Rep. Maxine Waters (D-Calif.), ranking member of the House Financial Services Committee, on Tuesday sent her second letter within the past few weeks asking regulators why they terminated the Independent Foreclosure Review (IFR) following a $9.3 billion settlement with 14 banks over shoddy foreclosures practices.

"The opaque nature of the consent order process and resulting agreement in principle raises many questions about the validity of the IFR and the appropriateness of settlement figures discussed in the news," Waters wrote.

The best interests of consumers should also be considered within the context of the revised agreement and the termination of the foreclosure program, she said.

In the letter, for example, she asked for additional information about how the IFR program was run, including all correspondence on the error rates in the reviewed files and any documents created by the independent consultants outlining how the loan files were to be reviewed.

Earlier this month, Waters sent a letter to Federal Reserve Chairman Ben Bernanke and Comptroller of the Currency Thomas Curry asking them for information about the settlement’s terms, and requesting that they include provisions concerning a minimum amount for principal reductions and other measures to immediately assist borrowers who remain in their homes.

Waters also has asked panel Chairman Jeb Hensarling (R-Texas) to hold a hearing on the issue.

Sen. Elizabeth Warren (D-Mass.) and House Government Reform and Oversight Committee ranking member Rep. Elijah Cummings (D-Md.) also have written a letter to the regulators suggesting greater transparency in the settlement and a request to provide information that shows the settlement is helping homeowners.

The foreclosure review process was set up in April 2011 for 14 mortgage servicers that engaged in shoddy residential loan servicing and foreclosure processing.

The new settlement, announced on Jan. 7, ended the process and required banks to provide cash payments and other assistance to borrowers who had homes in foreclosure in 2009 and 2010.

The banks — Aurora, Bank of America, Citibank, HSBC, Goldman Sachs, JPMorgan Chase, MetLife Bank, Morgan Stanley, PNC, Sovereign, SunTrust, U.S. Bank and Wells Fargo — will provide a total of $9.3 billion in assistance that is expected to help 4.4 million borrowers.

Critics of the program have said the loan-by-loan review was taking too long and homeowners weren't getting reimbursed for mistakes made by banks.

Mortgage servicers also questioned the independent review process and the contractors involved in going through the loan paperwork.

After announcing the agreement, Curry said that although the agencies “learned a great deal from the reviews that have been conducted to date” under the IFR process, “it has become clear that carrying the process through to its conclusion would divert money away from the impacted homeowners and also needlessly delay the dispensation of compensation to affected borrowers.”