Background

The Federal Reserve Board issued enforcement actions against four large mortgage servicers
--GMAC Mortgage, HSBC Finance Corporation, SunTrust Mortgage, and EMC Mortgage Corporation--in April 2011. Under those actions, the four servicers were required to retain independent consultants to review foreclosures that were initiated, pending, or completed during 2009 or 2010. The review was intended to determine if borrowers suffered financial harm directly resulting from errors, misrepresentations, or other deficiencies that may have occurred during the foreclosure process.

A number of servicers supervised by the Office of the Comptroller of the Currency (OCC) were also required to conduct independent reviews. (See below for the full list of servicers.)

The deadline to request a review was December 31, 2012.

Eligibility for Independent Foreclosure Review

Borrowers were eligible for an independent foreclosure review if they met the following criteria:

• the property securing the loan was the borrower's primary residence;
• the mortgage was in the foreclosure process (initiated, pending, or completed) at any time between January 1, 2009, and December 31, 2010; and  
• the mortgage was serviced by one of the following mortgage servicers:

Eligible borrowers were sent a Request for Review form by mail starting in November of 2011 when the program launched.

If a borrower previously filed a complaint with these servicers about foreclosures pending during the review period, they were still eligible to file an independent review of their foreclosure.

There were no costs associated with being included in the review; the review was a free program. Borrowers should beware of anyone requiring payments for assistance in connection with the independent foreclosure review or any other foreclosure assistance program.

Payment Agreement

In January of 2013, eleven of the mortgage servicers subject to the Independent Foreclosure Review reached an agreement with federal regulators to pay more than $8.8 billion¹ in cash payments and other assistance to help borrowers.

As a result of this agreement, the participating servicers would cease the Independent Foreclosure Review, which involved case-by-case reviews, and replace it with a broader framework allowing eligible borrowers to receive compensation more quickly. The OCC and the Federal Reserve accepted this agreement because it provides the greatest benefit to consumers subject to unsafe and unsound mortgage servicing and foreclosure practices during the relevant period in a more timely manner than would have occurred under the review process.

The total sum includes $3.4 billion in direct payments to eligible borrowers and $5.4 billion in other assistance, such as loan modifications and forgiveness of deficiency judgments. This agreement ensures that more than 3.9 million borrowers whose homes were in foreclosure in 2009 and 2010 with the participating servicers will receive cash compensation in a timely manner.

This agreement includes the following servicers: Aurora, Bank of America, Citibank, HSBC, JPMorgan Chase, MetLife Bank, PNC, Sovereign, SunTrust, U.S. Bank, and Wells Fargo. For these participating servicers, fulfillment of the agreement would meet the requirements of the enforcement actions issued in April 2011 that mandated that the servicers retain independent consultants to conduct an Independent Foreclosure Review.

Eligibility Under the Payment Agreement
Borrowers whose mortgage loan was serviced by one of the eleven participating servicers and who were involved in a foreclosure action between January 1, 2009, and December 31, 2010, will receive compensation whether or not they filed a request for review form. Borrowers do not need to take further action to be eligible for compensation.

Eligible borrowers are expected to receive compensation ranging from hundreds of dollars up to $125,000, depending on the type of possible servicer error.

Payment Process
A payment agent will be appointed to administer payments to borrowers on behalf of the servicers. Eligible borrowers are expected to be contacted by the payment agent by the end of March with payment details. Borrowers will not be required to execute a waiver of any legal claims they may have against their servicer as a condition for receiving payment. In addition, the servicers' internal complaint process will remain available to borrowers.

Federal Reserve's Role

The Federal Reserve's role is to ensure compliance with the enforcement actions issued in April 2011, including the payment process under the agreement in principle announced in January of 2013.

The Federal Reserve and the Office of the Comptroller of the Currency continue to work to reach similar agreements in principle with other servicers that are not parties to the agreements announced on January 7 and 18, 2013, but that are also subject to enforcement actions for deficient practices in mortgage loan servicing and foreclosure processing. Until agreements in principle are reached, the other servicers will continue with the Independent Foreclosure Review.

OCC and Federal Reserve examiners are continuing to closely monitor the servicers' implementation of plans required by the enforcement actions issued in April 2011 to correct the unsafe and unsound mortgage servicing and foreclosure practices.

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