Curry Addresses Critics of Foreclosure Deal in Speech

In a ""speech"":http://www.occ.gov/news-issuances/speeches/2013/pub-speech-2013-28.pdf before the ""Women in Housing and Finance"":http://www.whfdc.org/, Comptroller of the of the Currency Thomas J. Curry addressed critics of the recent $9.3 billion foreclosure deal.

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The ""foreclosure settlement"":http://dsnews.comarticles/ten-banks-reach-85m-deal-with-regulators-in-foreclosure-settlement-2013-01-07 officially ended what was known as the Independent Foreclosure Review (IFR) and replaced the review with a new approach that is said to compensate borrowers much more quickly.

The new deal requires 13 large servicers to provide a total of $3.6 billion in payments to 4.2 million eligible borrowers, along with $5.7 billion in additional foreclosure prevention assistance.

""That's the largest cash payout of any foreclosure-related settlement to date,"" said Curry.

Through the new approach, Curry said checks will start to go out to eligible borrowers by the end of March.

""Under the old process, reviews would have almost certainly continued into 2014, almost three years after the consent orders were signed,"" he added.

The IFR, or the former process, first stemmed from enforcement actions ""issued"":http://dsnews.comarticles/regulators-hand-down-enforcement-actions-to-servicers-and-their-vendors-2011-04-13 to 14 large servicers in April 2011 after reviews from regulators led to allegations of ""unsafe"" foreclosure and servicing activities. According to Curry, the actions had two main goals: fix what was broken and compensate those who were harmed.

In order to identify borrowers who would be compensated, servicers were required to hire an independent firm to provide free foreclosure reviews for borrowers who requested them.

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The reviews were only for borrowers who experienced a foreclosure action between 2009 and 2010. When the IFR ended, just over 500,000 borrowers had requested a review, and no one received compensation.

""While servicers had expended nearly $2 billion on the consultants' review through November 2012, we were still not ready to compensate the first borrower,"" Curry said.

Although the new approach means borrowers will start seeing compensation in the next month or so, Curry admitted the approach is still ""not without critics.""

In his speech, he addressed two main concerns. One is that the amount of compensation may be too low, and another is that some borrowers will receive compensation even though they may not have been harmed at all.

For those who think the payout is too low, Curry reminded them of the amount, $3.6 billion in direct payments and $5.7 billion in other assistance, while noting information ""suggests the cash payout alone is several times the potential payout had the reviews run their course.""

Curry also reminded critics not to view the $5.7 billion in isolation since other parts of the consent orders contain requirements addressing loss mitigation and foreclosure prevention activities.

As for the concern that unharmed borrowers will be compensated, Curry said it is an ""understandable"" concern, but noted, ""it overlooks the fact that each of these borrowers was part of a process that was far more deficient that any of us should be willing to accept.""

Curry also pointed to the costs of undertaking a review of each borrower.

""[I]t just doesn't make sense for these servicers to continue funneling money to consultants that could be better used to help distressed borrowers who have lost their homes. The cost of concluding these reviews would far exceed the harm that would be found,"" he explained.

As for the corrective actions, Curry said the orders required 97 separate actions, of which about 93 percent has been implemented or stood up.

Curry also ""answered calls"":http://dsnews.comarticles/end-of-independent-foreclosure-review-leads-to-more-questions-from-lawmakers-2013-02-01 for greater transparency and said the OCC will make periodic reports on the foreclosure mitigation part of the program and announced plans to issue a final report containing details regarding their findings.