OCC's Curry Defends Ending Foreclosure Reviews Early

WASHINGTON — Comptroller Thomas Curry argued Wednesday that regulators had no choice but to halt the independent foreclosure review process in favor of faster payouts to affected borrowers.

In a speech before the Women in Housing and Finance, Curry said the independent review process, in which consultants were hired to review the largest servicers loan-by-loan, was too cumbersome and was taking too much time.

He said scrapping the reviews and settling with many of the companies for $9.3 billion will allow consumers to receive compensation much faster, noting that the payouts will now begin next month.

"Changing course was the right thing to do for borrowers, for servicers, for the federal banking system, and for the housing markets," said Curry. "Our new approach will get more money to more people much more quickly."

In April 2011, the nation's 14 largest mortgage services were ordered to clean up their foreclosure processes and remediate affected borrowers. The process included an independent foreclosure review prior to payouts.

But the IFRs derailed late last year after it was reported that consultants were being paid far more than what consumers would receive in payouts, which had yet to be distributed.

"In late 2012, at the same time we were raising awareness of the IFR, we also came to the realization that maintaining our course would significantly delay compensation without appreciable benefit to the affected borrowers," he said. "I decided we needed to change direction and the Federal Reserve came to the same conclusion."

The agencies instead settled with 13 of the largest servicers last month, totaling $9.3 billion to be compensated to 4.2 million eligible borrowers. Through the new process, bowers will begin receiving checks in late March, Curry said.

Had the independent reviews continued, it would have taken through 2014, thereby delaying payouts to consumers even longer.

The new process, however, has raised concerns by lawmakers about how regulators will determine the size and payment distribution to borrowers without completing the independent review.

Curry acknowledged this, contending that "regulators spent a significant amount of time determining categories of potential harm" and are still analyzing the IFRs.

Curry said they now have "a much simpler process," further detailing that they will break up the payouts based on potential errors across 11 basic groups: from "relatively minor" to "very egregious." Borrowers will be placed in a group based on objective loan attributes and the characteristics of each borrower.

The OCC and the Federal Reserve will then determine the amount paid to each borrower, which can range from hundreds of dollars to $125,000. The settlement is split between $3.6 billion in payouts and $5.7 billion in foreclosure prevention assistance.

Still, many critics say that is not enough money to account for the harm done to borrowers. They say the independent reviews would have forced banks to pay more, a charge Curry disputed.

"I recognize that this approach is not without its critics," Curry said. "The best available information we have suggests the cash payout alone is several times the potential payout had the reviews run their course."

The servicers had paid nearly $2 billion to consultants for the reviews by November 2012 and yet no borrower had been compensated, Curry said.

"I understand there is a great interest in this effort and its progress, and I understand the calls for greater transparency," he said.

In response, the OCC is in the process of finalizing the amended orders to be made public "soon," Curry said. He added that the agency will also make periodic reports on the foreclosure mitigation part of the program and issue a final report "with considerable detail."

"Of course, the Congress, GAO, and the Treasury Inspector General will continue their oversight work to help ensure that the most information possible is made public," Curry cautioned.

In his opening remarks, Curry also noted that they were "making good progress on rulemakings" such as the Volcker Rule and Basel III.

"I remain very hopeful that we'll soon have in place final regulations that provide the clarity the industry needs," he said.

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