More than one month after the surprise announcement of the termination of the Independent Foreclosure Review (IFR) in favor of an $8.5 billion settlement with 10 major servicers, Comptroller of the Currency Thomas J. Curry made his first public explanation on the decision to shut down the IFR.
Speaking yesterday in Washington, D.C., before a meeting of Women in Housing and Finance, Curry defined the IFR as a well-intended endeavor that ultimately overwhelmed everyone involved.
‘The IFR was set up to determine whether eligible borrowers in foreclosure were afforded all of the protections they are entitled to under the law and to provide compensation where errors resulted in financial harm,’ he said. ‘We knew that would be a difficult task, but it proved to be much more complicated than anyone anticipated.’
Curry explained that although the federal government spent $35 million in a marketing campaign to raise awareness of the IFR – resulting in more than 500,000 requests by borrowers for reviews – and the servicers that agreed to the IFR spent nearly nearly $2 billion on independent consultants to handle the review, no compensatory funds were distributed by November 2012.
‘So in late 2012, at the same time we were raising awareness of the IFR, we also came to the realization that maintaining our course would significantly delay compensation without appreciable benefit to the affected borrowers,’ Curry said. ‘I decided we needed to change direction, and the Federal Reserve came to the same conclusion. This was not a decision I made lightly. I knew that the servicers, independent consultants, community groups and even some members of Congress had made a personal and concerted effort to support the process and make it work as well as possible. I am deeply grateful to everyone who supported our efforts, and the added data we received will immensely improve our final analysis.’
Curry claimed that shutting down the IFR in favor of the Jan. 7 settlement would ensure that compensation was swiftly expedited.
‘The modified consent orders will provide $3.6 billion in payments to 4.2 million eligible borrowers and $5.7 billion in additional foreclosure prevention assistance,’ Curry said. ‘That's the largest cash payout of any foreclosure-related settlement to date. Under this approach borrowers will be contacted and we expect checks will start to go out by the end of March. Under the old process, reviews would have almost certainly continued into 2014, almost three years after the consent orders were signed.’
Although Curry did not address why the decision to scrap the IFR and pursue a settlement was conducted in total secrecy – a point that raised the ire of the leadership of the House Oversight Committee, which claimed they only learned of the settlement from media reports – he acknowledged that the settlement's funds distribution process has been the subject of skepticism.
‘Regulators spent a significant amount of time determining categories of potential harm,’ he said. ‘The types of errors that could have occurred fall into 11 basic groups from relatively minor to the very egregious. Eligible borrowers will be slotted into each group based on objective loan attributes and borrower characteristics and then compensated based on that category, a much simpler process than the original IFR. The Office of the Comptroller of the Currency and the Federal Reserve will then determine the amount of payment for each category, ranging from hundreds of dollars to $125,000.
‘To those who think the restitution will be insufficient, I would call their attention to the size of the required outlays – $3.6 billion in direct payments and $5.7 billion in other assistance,’ he added. ‘The best available information we have suggests the cash payout alone is several times the potential payout had the reviews run their course. And the $5.7 billion in other assistance will result in meaningful relief to borrowers still struggling to keep their homes, and this assistance can make a real difference for those families and their communities.’