Independent Foreclosure Review
- Executive Summary
- Background on the Independent Foreclosure Review (IFR)
- Transition from the IFR to the Payment Agreement
In 2011 and 2012, the OCC, the Federal Reserve, and the OTS issued Consent Orders in response to on-site reviews conducted in 2010 and 2011 that found deficiencies and unsafe and unsound practices in mortgage servicing and foreclosure processing at several large residential mortgage servicers. The independent file reviews required by the Consent Orders progressed more slowly than anticipated and were replaced at 15 of 16 servicers by a Payment Agreement that provided approximately $10 billion in cash payments and other assistance to borrowers. This approach provided for payments to borrowers faster than if the IFR had continued, and it resulted in the servicers paying to borrowers more than the total amount borrowers would likely have received through the IFR process. To date, borrowers have cashed or deposited over 85 percent of the total amount of cash payments that servicers were required to pay under the Payment Agreement.
For servicers where the IFR ended under the Payment Agreement in January 2013, the independent consultants engaged to perform the IFR reported completing approximately 14 percent of the files slated for review and finding preliminary financial injury errors in approximately 4.5 percent of the file reviews they completed as of year-end 2012. A discussion of the concerns and issues that the independent consultants may have identified during the review process before it came to a close provided additional information to the supervisory teams such that they could address any concerns or issues through their routine supervisory processes. The regulators plan to ensure that all banking organizations subject to Consent Orders have taken all necessary actions to address the deficiencies found in servicing and foreclosure processes.
After the Payment Agreement has been fully implemented, the Federal Reserve expects to publish data on the final status of the cash payments and the foreclosure prevention assistance. In addition, the Federal Reserve has instructed Federal Reserve-regulated servicers, the independent consultants that conducted the IFR on their behalf, and Rust, their administrative agent, that the Federal Reserve has no objection to the release of information in their possession that relates solely to a borrower who requests information about the IFR review of that borrower's foreclosure file.