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Letter to Special Inspector General Christy Romero, Chairman of the Federal Reserve Ben Bernanke, and Comptroller of Currency Thomas Curry - Investigation of Mortgage Servicers Who Benefitted by Misleading Borrowers Eligible for HAMP

Letter

By:
Date:
Location: Washington, DC

Congresswoman Maxine Waters, Ranking Member of the House Financial Services Committee, sent a letter today to Christy L. Romero, Special Inspector General for the Troubled Asset Relief Program (SIGTARP), calling for an investigation of Bank of America or any other mortgage servicer, who allegedly benefitted by misleading borrowers eligible for the Home Affordable Modification Program (HAMP).

Ranking Member Waters' letter comes after an article in Bloomberg cited court documents in which former loan employees stated that, Bank of America, the second-biggest U.S. lender, "regularly drilled" employees, "to maximize fees for the bank by fostering and extending delay of the HAMP modification process by any means."

The letter notes that according to significant anecdotal evidence as well as a number of academic studies that "foreclosure is often the most profitable end result for a servicer that does not own the loan they are servicing."

"Bank of America has received $992 million in Incentive Payments related to HAMP, making them the second largest beneficiary of such payments." Ranking Member Waters writes. "While that figure pales in comparison to the other Troubled Asset Relief Program (TARP) funds that the bank has benefited from, I do think it represents a significant amount of assistance from taxpayer," the letter continues.

Ranking Member Waters also sent a letter to the Office of the Comptroller of the Currency (OCC) and the Board of Governors of the Federal Reserve (Fed) asking them to investigate how or whether these allegations against Bank of America interact with the Independent Foreclosure Review settlement reached between regulators and mortgage servicers in January 2013.

The full text of both letters is below.

June 18, 2013

The Honorable Christy Romero
Special Inspector General
SIGTARP
1801 L Street NW, 4th Floor
Washington, DC 20220

Dear Special Inspector General Romero:

As you are aware, the Office of the Comptroller of the Currency (OCC) and the Board of Governors of the Federal Reserve (Fed) recently reached a settlement with 14 servicers based on a review of their foreclosure practices from 2009 to 2010. The Independent Foreclosure Review (IFR), which sought to identify individual harms caused to borrowers, was ended upon agreement to that settlement.

While the IFR was a flawed process, the failure to appropriately administer the Home Affordable Mortgage Program (HAMP) was a central error identified during the time of the reviews. As you know, the OCC and Fed settled HAMP type claims on behalf of borrowers for as little as $300.

It has come to my attention via a June 14th Bloomberg article I have enclosed, that employees at one of the nation's largest servicers are alleged to have "falsified records
and were told to delay U.S. loan-assistance applications by requesting paperwork that the (bank) had already received." The goal of the delay, according to the article, was to ensure that rather than receiving a HAMP modification, the borrower would be foreclosed upon. It has been noted in numerous studies that foreclosure is often the most profitable end result for a servicer that does not own the loan they are servicing. It goes without saying that this is an outright abuse of consumers and government mortgage assistance programs.

According to your agency's most recent report, Bank of America has received $992 million in Incentive Payments related to HAMP, making them the second largest beneficiary of such payments. While that figure pales in comparison to the other Troubled Asset Relief Program (TARP) funds that the bank has benefited from, I do think it represents a significant amount of assistance from taxpayers.

The OCC and Fed did not report any violations uncovered by the IFR that match the descriptions in this article and many claims within the scope of the IFR and the National Mortgage Settlement have already been released by the government. However, as it is SIGTARP's stated mission to investigate waste, fraud and abuse of TARP funds, which include HAMP incentive payments, I am writing to request that you investigate these claims at Bank of America or any other servicer which you have reason to believe may have benefitted by misleading borrowers eligible for HAMP.

Sincerely,

Maxine Waters
Ranking Member

June 18, 2013

The Honorable Ben Bernanke
Chairman
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue
Washington, DC 20551

The Honorable Thomas J. Curry
Comptroller of the Currency
400 7th Street SW
Washington, DC 20219

Dear Chairman Bernanke and Comptroller Curry:

As you are aware, the Office of the Comptroller of the Currency (OCC) and the Board of Governors of the Federal Reserve (Fed) recently reached a settlement with 14 servicers based on a review of their foreclosure practices from 2009 to 2010. The Independent Foreclosure Review (IFR), which sought to identify individual harms caused to borrowers, was ended upon agreement to that settlement.

While the IFR was a flawed process, the failure to appropriately administer the Home Affordable Mortgage Program (HAMP) was a central error identified during the time of the reviews. As you know, the OCC and Fed settled HAMP type claims on behalf of borrowers for as little as $300.
It has come to my attention via a June 14th Bloomberg article I have enclosed, that employees at one of the nation's largest servicers are alleged to have "falsified records and were told to delay U.S. loan-assistance applications by requesting paperwork that the (bank) had already received." The goal of the delay, according to the article, was to ensure that rather than receiving a HAMP modification, the borrower would be foreclosed upon. It has been noted in numerous studies that foreclosure is often the most profitable end result for a servicer that does not own the loan they are servicing. It goes without saying that this is an outright abuse of consumers and government mortgage assistance programs.

According to the most recent report of the Special Inspector General of the Troubled Asset Relief Program (SIGTARP), Bank of America has received $992 million in Incentive Payments related to HAMP, making them the second largest beneficiary of such payments. While that figure pales in comparison to the other Troubled Asset Relief Program (TARP) funds that the bank has benefited from, I do think it represents a significant amount of assistance from taxpayers.

The OCC and Fed did not report any violations uncovered by the IFR that match the descriptions in this article and many claims within the scope of the IFR and the National Mortgage Settlement have already been released by the government. However, it is not clear from the report when these alleged activities occurred and whether they would have been covered within the scope of the either settlement. I am writing to request that your agencies investigate the claims set forth in the lawsuit to determine whether they were isolated to a single servicer, take whatever actions remain available to your agencies regarding the allegations, and make appropriate recommendations to the Department of Justice.

Furthermore, any findings should be shared with the Monitor of the National Mortgage Settlement to aid in his ongoing work ensuring compliance with servicing standards set forth by the settlement.

Sincerely,

Maxine Waters
Ranking Member


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