Congresswoman Waters Renews Her Call for Mortgage Servicer Accountability


Washington, DC – October 28, 2011 – (RealEstateRama) — Congresswoman Waters (CA), Ranking Member on the Subcommittee on Capital Markets and Government Sponsored Enterprises, today led 15 of her colleagues in the House of Representatives, renewing her call for U.S. bank regulators to publicly release information regarding the steps that mortgage servicers are taking to prevent illegal foreclosure practices.

Recent news reports indicate that the claims process for households harmed by faulty and fraudulent foreclosure processing is likely to begin soon. Despite this fact, regulators have released no information to the public about how eligible households were identified, how these households will be reached by mortgage servicers, and how they will go about having their claims processed.

“The only way this claims process will be fair is if the regulators shine a bright light on mortgage servicers, and make them demonstrate to the public how they’re being held accountable. To date, this entire exercise has been conducted in the shadows,” said the Congresswoman. “I fear that without greater transparency, we’re setting homeowners, and foreclosed-upon families, up for more disappointment.”

In July, the Congresswoman led 11 of her colleagues in sending a letter to regulators, asking regulators for information about how mortgage servicers were reforming their practices, and about potential conflicts of interest for the “independent consultants” they hired to review their foreclosure policies. The U.S. banking regulators declined to respond to the Congresswoman and her colleagues.

The full text of today’s letter from the Congresswoman to regulators is below:

Mr. John Walsh
Acting Comptroller of the Currency
Office of the Comptroller of the Currency
Independence Square
250 E. Street SW
Washington, DC 20219-0001

The Honorable Ben S. Bernanke
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue NW
Washington, DC 20551

Dear Acting Comptroller Walsh and Chairman Bernanke:

This letter is to follow-up on correspondence sent to your offices on July 20, 2011, wherein we requested that you to make public critical information related to enforcement actions taken against mortgage servicers regarding their improper foreclosure practices. To date, we have not received a response from your offices indicating whether you intend to provide the public with any of the information we requested.

As we stated in our July letter, “we believe it is essential that [information related to the April 2011 Consent Orders] be made available to the general public or the public will lack confidence in both the foreclosure review process and results.” With more than six months having passed since the release of the Consent Orders, and more than three months having passed since our initial request for transparency, we fear that public confidence in this process is quickly eroding. Moreover, given that in September, news reports indicated that servicer outreach to affected borrowers was “expected to [launch] in the coming weeks,” we think it is essential for the public to have information regarding how servicers and their consultants identified households with eligible claims.[1] It would be premature to begin the claims process without the public first having a clear understanding of how eligible households were identified.

Additionally, we are very concerned about the methods servicers will use to find and contact households harmed by foreclosure-processing problems. Servicers have a poor performance track-record in effectively engaging with borrowers, and, in the claims process, have a natural disincentive to reach the households their practices have harmed. Moreover, many of the affected individuals will likely be difficult to reach given the housing and economic instability faced by families after foreclosure.

We also remain concerned about potential conflicts of interest between the servicers and the firms hired to do these foreclosure reviews, and repeat our request for you to release the “engagement letters” governing the mortgage servicers’ contracts with their consultants. Though you have declined to provide us with information about the foreclosure review consultants selected by the servicers, recent reporting has speculated that several of the auditors selected are currently working for the servicers on other consulting assignments.[2]

Finally, we are deeply concerned about the level of expertise of the staff hired by the servicers and/or their foreclosure review consultants as it relates to implementing the terms of the Consent Orders. Job solicitations for positions such as “mortgage foreclosure file reviewer” have recently appeared on various job-aggregator websites (two such postings are enclosed with this letter). The required education and experience levels noted in these job postings raise questions about whether junior level employees, without experience in the practice of law, have the ability to make complex legal judgments on matters such as whether proper “ownership” of the note and mortgage was established by the servicer, whether foreclosures were in accordance with applicable federal and state laws, as well as the U.S. Bankruptcy Code, and whether fees and penalties were legally assessed on borrowers. Distressingly, the job solicitations for these positions seem to suggest that servicers intend to hire individuals with no more expertise than the so-called “robo-signers” that created many of these problems in the first place.

We respectfully request an immediate response to this letter, indicating whether the Office of the Comptroller of the Currency (OCC) and the Federal Reserve intend to make public any of the information requested in our July 2011 letter. Should the OCC and the Federal Reserve decline to make this information public, we request a written response outlining the rationale underlying such decision.

Mikael Moore
mikael.moore (at) (dot) gov


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