Reed to Fed Chair, Comptroller: Send Leftover Foreclosure Prevention Funds to RI

Press Release

Seeking to help Rhode Islanders in need of foreclosure prevention assistance, U.S. Senator Jack Reed (D-RI) urged Federal Reserve Chair Janet Yellen and Comptroller of the Currency Thomas Curry to divert leftover funds from the Independent Foreclosure Review (IFR) to the Hardest Hit Fund RI, which is in need of additional foreclosure prevention funding.

The IFR was instituted in 2011 by the Federal Reserve and the Office of the Comptroller of the Currency (OCC) to create a process by which deficient mortgage servicing and foreclosure issues could be addressed and injured homeowners could find some relief. In 2013, the Federal Reserve and the OCC replaced the IFR in part with approximately $3.9 billion in direct cash payments to qualified injured borrowers. However, in its IFR report this month, the Federal Reserve noted that, "despite the outreach efforts to increase the number of in-scope borrowers who have received their cash payments, not all borrowers will cash or deposit their checks within the time allowed for that purpose…[and] the regulators have not at this time made any final decision with respect to the distribution of the residual funds."

In his letter to Yellen and Curry, Reed reiterated a request he made in 2013 that the Federal Reserve and the OCC prepare for the possibility of residual IFR funding by considering established means of reaching homeowners and communities in need of assistance.

"We need to do everything we can to help responsible homeowners," said Reed, a senior member of the Senate Banking, Housing, and Urban Affairs Committee. "It is critical that the federal government, in partnership with state and local agencies, employs every tool in its arsenal to help homeowners avoid foreclosure and get back on their feet. If there are leftover funds, we are ready to put that money to good use in Rhode Island."

According to HousingWorks RI, Rhode Island experienced a 19.9% increase in the number of filed residential foreclosure deeds in the first quarter of 2014, when compared to the first quarter of 2013. In addition, Rhode Island ranked first in New England and ninth nationally in the percentage of underwater mortgages, at 17% in the first quarter of 2014.

As they work toward a decision on the leftover IFR funds, Reed suggested Yellen and Curry consider the Hardest Hit Fund RI (HHFRI), run by the state's housing finance agency, Rhode Island Housing (RIH). RIH won the National Council of State Housing Agencies' Special Achievement Award in 2012 in recognition of its foreclosure prevention efforts. HHFRI is still operational and ready to assist Rhode Island homeowners, but has allocated all of its current funding, despite the continued need for foreclosure prevention assistance in the state.

"Clearly, Rhode Island has a demonstrated need for additional foreclosure assistance, and with RIH, has a nationally recognized agency capable of effectively deploying resources to prevent foreclosures," Reed wrote to Yellen and Curry. "As you make your final decision with respect to the distribution of residual IFR funds, I urge your full and fair consideration of HHFRI as a potential recipient of these funds."

Reed raised this issue publicly with Federal Reserve Chair Yellen last week during a Senate Banking Committee hearing, encouraging the Fed to get help to consumers in a timely manner:

"I am told that that [the IFR] program still has cash on hand, that you haven't been able to reach the people, people who have been receiving checks haven't cashed them or don't intend to. This residual money, can you reprogram to state agencies or local initiatives that are much more effective in getting the money out? Could you consider that?" Reed asked during the July 15, 2014 hearing.

Yellen replied that "no decision at all has been made at this point on what to do with residual funds, and so there may be a number of options we've yet -- we've yet to debate that."

"There are states, you know, and regions that need this help," Reed noted in response. "If you could get the money to the people who can get it out, that would be, I think, positive."

Reed has long been a champion of fixing America's broken foreclosure process. In 2010, Reed helped write key sections of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the Consumer Financial Protection Bureau and directed it to implement major reforms in the mortgage industry. To help bolster Rhode Island's economy and provide qualified homeowners with additional resources to prevent foreclosures, Senator Reed has secured $79 million in federal foreclosure prevention funds through the Hardest Hit program, and more than $25 million in funding for the Neighborhood Stabilization Program.

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