By Alan Zibel
WASHINGTON--U.S. bank regulators didn't work hard enough to make sure
the public understands a process set up to compensate borrowers who
were subject to foreclosure-processing errors, a federal watchdog has
found.
The Government Accountability Office, in a report released Thursday,
found that the review process designed by the Office of the
Comptroller of the Currency and Federal Reserve has been difficult for
consumers to understand. The report echoed concerns raised over the
past year by several Democratic lawmakers on Capitol Hill.
An outreach letter sent to consumers, a website and a form needed to
request a review were "written above the average reading level of the
U.S. population, indicating that they may be too complex to be widely
understood," the GAO found. Without those details, "borrowers may not
be motivated to participate," the report said.
Though the review process was launched last fall, regulators announced
just last month that borrowers may be eligible for up to $125,000 per
consumer, depending on the severity of the error.
Comptroller of the Currency Thomas Curry didn't dispute the report's
conclusions, and said the agency will work to make sure the forms used
by borrowers are more readable and contain information about how much
money borrows are in line to receive.
A Fed official, Sandra Braunstein, defended the regulators' efforts,
saying that regulators believe that the forms complied with federal
standards for plain writing and were translated into several
languages.
The review process was launched after the Fed and the OCC in April
2011 required 14 mortgage-servicing companies, including Bank of
America Corp. (BAC), Wells Fargo & Co. (WFC), J.P. Morgan Chase & Co.
(JPM) and Citigroup Inc. (C), to hire consultants to evaluate their
foreclosure practices. Consumers who suffered "financial injury" could
be in line for compensation after the consultants review homeowners'
cases.
The review process is one of several efforts to compensate consumers,
after revelations surfaced in the fall of 2010 about banks' use of
so-called robo-signers--bank employees who signed off on thousands of
foreclosure filings and falsely claimed to have personally reviewed
each case.
The bank regulators' compensation system is separate from a $25
billion settlement that federal and state officials announced earlier
this year to settle foreclosure-abuse allegations.
However, the bank regulators' process has had problems reaching
customers. Only about 194,000 of 4.4 million borrowers sent letters
last year have requested a review of their cases to date, regulators
said last month. Separately, independent consultants are doing reviews
of about 145,000 consumers' files.
The outreach materials sent to consumers "were written in technical
legal language, and provided little information to borrowers about the
remediation available to them," said Rep. Maxine Waters (D., Calif.)
in a statement. "I believe that this lack of clarity is one reason
why, unless servicers change their approach, only a small fraction of
eligible households will eventually be screened for any harm caused by
improper foreclosures. "
Write to Alan Zibel at alan.zibel@dowjones.com
(END) Dow Jones Newswires
July 05, 2012 14:03 ET (18:03 GMT)
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