GAO Recommends Enhanced Oversight Of Independent Foreclosure Review Settlements

Foreclosure Federal Reserve Mortgage Servicing OCC GAO

On April 29, the GAO published a report on its examination of the 2013 amended consent orders that ended the Independent Foreclosure Review process. After testing the regulators' major assumptions, the GAO concludes “that the final negotiated amount generally fell within a reasonable range.” However, the GAO criticizes the regulators for not defining specific objectives for the $6 billion in foreclosure prevention actions required by the settlements, for not analyzing available data, such as servicers' recent volume of foreclosure prevention actions, and for not analyzing approaches by which servicers' actions could be credited toward the total of $6 billion. In addition, the GAO found that while the OCC and the Federal Reserve are verifying servicers' foreclosure prevention policies, they are not testing policy implementation. The GAO believes that without specific procedures, regulators cannot assess implementation of the principles and may miss opportunities to protect borrowers. The GAO recommends that the OCC and the Federal Reserve Board “should define testing activities to oversee foreclosure prevention principles and include information on processes in public documents.”  The GAO also believes the regulators should release publicly information on the processes used, such as how decisions about borrower payments were made, and that “[i]n the absence of information on the processes, regulators face risks to public confidence in the mortgage market, the restoration of which was one of the goals of the file review process.”