Today, Rep. Elijah E. Cummings, Ranking Member of the House Committee on Oversight and Government Reform, announced the introduction of H.R. 1706, The Mortgage Settlement Monitoring Act of 2013, to create an Independent Monitor to oversee the distribution of funds paid by mortgage servicers for illegal foreclosures and other abuses against homeowners under their settlement agreement with federal regulators.
Original co-sponsors of the legislation include Ranking Members Maxine Waters, George Miller, John Conyers, and Henry Waxman, as well as Representatives John F. Tierney, Zoe Lofgren, and Jan Schakowsky.
The bill has been endorsed by the Center for Responsible Lending, the National Consumer Law Center, the National Fair Housing Alliance, the National Association of Consumer Advocates, Americans for Financial Reform, National People's Action, the Connecticut Fair Housing Center, and Consumer Action.
"Mortgage servicers have now admitted that they broke the law by illegally foreclosing on American families and committing numerous other abuses, but regulators refuse to provide even the most basic information about the extent of the abuses that were uncovered," said Cummings. "Since federal regulators now plan to rely on these same banks to determine payouts and deliver settlement funds to borrowers, we need an Independent Monitor to bring transparency and accountability to this process."
On February 28, 2013, the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency (OCC) entered into amended consent orders requiring 11 mortgage servicers that originally entered consent orders in 2011 to provide cash payments and other assistance to borrowers, including more than $3 billion in payments to borrowers who were in foreclosure in 2009 and 2010. This settlement prematurely ended the Independent Foreclosure Review that banks were ordered to conduct to identify harms suffered by individual borrowers.
The Mortgage Settlement Monitoring Act of 2013 would create an Independent Monitor appointed by the President to review the compliance of all parties to the settlement--including both the mortgage servicers and the Federal Reserve and the OCC--and issue quarterly reports to Congress and the public. These reports must include:
A description of the criteria and methodology used to determine eligibility for direct and indirect relief, as well as a description of due process protections for recipients;
Information on borrowers who receive relief, broken down by mortgage servicer and including demographic information, the level of direct compensation for similarly situated borrowers, and the number and amounts of principal reduction loan modifications and other types of borrower assistance;
Information on the credit given to mortgage servicers for direct and indirect compensation provided to borrowers; and
A list of instances in which mortgage servicers or regulators fail to comply with the terms of the settlement, and a list of actions taken by the Federal Reserve or the OCC to compel compliance.
On January 31, 2013, Cummings and Senator Elizabeth Warren launched a joint investigation of the settlement and requested that the Federal Reserve and the OCC provide documents relating to illegal actions by mortgage servicers identified during the Independent Foreclosure Review. The Federal Reserve and OCC refused to provide these documents, arguing that they are the "trade secrets" of mortgage servicers.
On April 4, 2013, the Government Accountability Office issued a report examining the Independent Foreclosure Review, finding: "Complexity of the reviews, overly broad guidance, and limited monitoring for consistency impeded the ability of the Office of the Comptroller of the Currency (OCC) and the Board of Governors of the Federal Reserve System (Federal Reserve) to achieve the goals of the foreclosure review." The report concluded that "limited communication with borrowers and the public adversely impacted transparency and public confidence" and recommended that regulators "apply lessons from the foreclosure review process, such as enhancing planning and monitoring activities to achieve goals, as they develop and implement the activities under the amended consent orders."
Last week, the New York Times editorialized about the need for an independent monitor to oversee, analyze, and publicly report on the implementation of the settlement after some borrowers were unable to cash the checks they received as part of the deal.