WASHINGTON (4/5/13)--Complexity, overly broad guidance, and limited monitoring for consistency hampered the progress of regulators' Independent Foreclosure Review (IFR), the U.S. Government Accountability Office (GAO) reported on Thursday.
The IFR process started in 2011 as part of consent orders issued against 14 top mortgage servicers. The foreclosure review process was meant to provide foreclosed borrowers with an opportunity to have their cases reviewed for errors and misrepresentations on the part of servicers. Restitution was also a possibility for some foreclosed borrowers.
The Office of the Comptroller of the Currency and the Federal Reserve Board on Jan. 7 announced that the IFR process would instead be replaced with a tentative $9.3 billion settlement. The settlement would allow all IFR-eligible borrowers "to receive compensation significantly more quickly," the OCC said in a release.
Thursday's GAO report said limited communication with borrowers and the public adversely impacted transparency and public confidence in the foreclosure review. Borrowers that asked for reviews also experienced gaps in communication, with some waiting for nearly one year before they were updated on the status of their case, the GAO said.
"Broad guidance and limited monitoring reduced the potential usefulness of data from consultants and increased risks of inconsistency," the GAO added. Guidance for consultants and others reviewing lending cases was revised. "Regulators lacked objective monitoring measures, resulting in difficulty assessing the extent of borrower harm," GAO added.
Rep. Maxine Waters (D-Calif.), who, along with other legislators, requested the GAO study in early 2012, said "the report confirms that the Independent Foreclosure Review process was poorly designed and executed." She also criticized the OCC's oversight of independent consultants that were hired by mortgage servicers to work the review cases, and said she will soon introduce "legislation to address the problem of relying on outside contractors for enforcement actions.
For the GAO report and Rep. Waters' statement, use the resource link.