By Vicki Needham - 01/31/13 03:30 PM EST
Sen. Elizabeth Warren (D-Mass.) has launched an investigation into why the government ended a foreclosure review process.
Warren (D-Mass.) and Rep. Elijah Cummings (D-Md.), in a letter to Federal Reserve Chairman Ben Bernanke and Comptroller of the Currency Thomas Curry, seek documents related to the government's recent multi-billion settlement with mortgage servicers that ended a process to review mortgagers that had been involved in shoddy practices.
"We believe that public confidence in the settlement, the confidence necessary to speed recovery of the housing markets, will exist only if the OCC and the Federal Reserve provide additional transparency into the process used and information gathered during the Independent Foreclosure Review process,” wrote Warren and Cummings, who is the ranking member on the House Oversight and Government Reform Committee.
“It is critical that the OCC and the Federal Reserve disclose additional information about the scope of the harms found to establish confidence in the sufficiency and integrity of the settlement," said the letter, which was obtained by The Hill.
The request for documents is one of the first high-profile moves taken by Warren since she arrived in the Senate. Warren is a hero to liberal groups for her advocacy of a Consumer Financial Protection Bureau set up by the financial reform bill.
Her partnership with Cummings is also notable given the House Democrat's standing as the top member of his party on the Oversight panel.
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 $3.6 billion in cash compensation while an additional $5.7 billion will be provided by the servicers for mortgage assistance to nearly 4.2 million borrowers.
More than 112,000 borrowers whose homes were in foreclosure in 2009 and 2010 with HSBC will receive cash compensation under the agreement in principle.
Critics of the program said the loan-by-loan review was taking too long and homeowners weren't getting payment for mistakes made by banks.
Mortgage servicers also questioned the independent review process.
The lawmakers are asking for the release of all IFR performance reviews by the Fed or the OCC, including all documents reviewing the performance of each of the independent contractors that conducted reviews of borrower files under the terms of the consent orders issued nearly two years ago.
They also want to see all documents compiled by the Fed or the OCC indicating the total amount of settlement funds paid to each independent contractor, the total number of reviews of borrower files initiated by each of the independent contractors and the number of borrower files where improper practices were discovered.
After announcing the Jan. 7 agreement, Curry said that although the agencies “learned a great deal from the reviews that have been conducted to date” under the Independent Foreclosure Review 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.”
The lawmakers are requesting that all information be delivered by Feb. 22.
House Financial Services ranking member Maxine Waters (D-Calif.) sent a similar letter on Wednesday calling for the final settlement, which is still being negotiated. She said it should include a minimum amount for principal reductions, an escalation process for homeowners, and the prevention of foreclosures for the 4.4 million eligible borrowers who are still in their homes.
She echoed Warren and Cummings in asking that the settlement provide for greater transparency, tighter oversight and the collection of detailed data.
This story was updated at 11:20 a.m.