Fed releases bank plans to fix foreclosure errors

Among the areas targeted under the plans are improving communications between banks and borrowers, limiting foreclosures on mortgages that have already been modified to be more affordable, and establishing better control over third-party vendors when mortgage servicing is outsourced by a bank.

The Fed plan also requires mortgage servicers to provide "appropriate remediation" to borrowers who were financially harmed as a result of errors on the part of a servicer, including how to review foreclosure files to identify such errors.

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The "action plans" were drafted by banks after the Fed demanded them as part of an enforcement action in 2011. The Fed vowed to "closely follow" the implementation of those plans to make sure flaws are addressed and to determine how much damage was done to struggling homeowners in 2009 and 2010. More action plans will be forthcoming from other banks, the central bank said.