WASHINGTON — Sen. Elizabeth Warren of Massachusetts and Rep. Elijah Cummings of Maryland have launched a probe into a major settlement announced with mortgage servicers in January that halted the troubled independent foreclosure review.
The two Democrats sent a letter Thursday to Federal Reserve Board Chairman Ben Bernanke and Comptroller of the Currency Thomas Curry, requesting documents related to the foreclosure review and the settlement by Feb. 22. They said they are seeking information about performance evaluations of the foreclosure review process and its contractors, as well as documents related to the compensation of those independent contractors and the number of borrower files reviewed, including the number in which "unsafe or unsound" practices were identified.
Critics have warned that the foreclosure review process was costly and lacked independence, causing some to wonder if the $8.5 billion settlement deal was a quick and convenient way to put an end to the program.
"We share the desire of the OCC and the Federal Reserve to get more money to more people quickly, and we appreciate the information you have provided to congressional staff on this issue," the lawmakers said in the letter. "However, we believe that public confidence in the settlement — the confidence necessary to speed recovery of the housing markets — will exist only if the OCC and the Federal Reserve provide additional transparency into the process used and information gathered during the Independent Foreclosure Review process."
Meanwhile, Rep. Maxine Waters, the top Democrat on the House banking panel, also contacted regulators on Thursday regarding her own concerns about the settlement with ten major banks.
"Many questions remain about why the IFR was cancelled, how your agencies went about replacing it with a negotiated settlement, and how the 4.4 million estimated eligible universe of borrowers will be evaluated for harm and compensated," Waters said in a letter to Bernanke and Curry.
The California Democrat asked regulators to incorporate a number of provisions in their final agreement with the banks, to establish an independent monitor to oversee the settlement, collect demographic and other data on those assisted under the settlement and provide indirect relief to some in the form of principal reductions. In addition, she requested information about the preliminary foreclosure reviews already conducted, about how regulators reached the settlement amount and about what steps the agencies are taking to reform servicing processes going forward.
"After consistent interaction with your agencies over the IFR process since the consent orders were issued in April 2011, I found the sudden end of the IFR, and the lack of engagement with members of Congress over your agencies' change in direction, to be troubling," Waters said in the letter.