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Board of Governors of the Federal Reserve System
Washington, D.C. 20551
September 29, 2014
Board Of Governors of the Federal Reserve System
Washington, D.C. 20551
Dear Mr. Bialek:
Thank you for the opportunity to comment on your draft report evaluating the Board's oversight of the payment agreement reached by the Office of the Comptroller Of the Currency (OCC) and the Board with several large mortgage loan servicers that replaced the Independent Foreclosure Review (IFR) process required by enforcement actions. As the report recognizes, as of August 15, 2014, borrowers of the 13 servicers covered by the report have cashed or deposited checks totaling approximately $3.15 billion, which represents approximately 86 percent of the value of checks issued to borrowers of those servicers. In negotiating the payment agreement, the Board coordinated with the OCC, which regulated most of the servicers participating in the IFR. The Board entered into the agreement to provide monetary compensation, in a timelier manner than was experienced with the IFR, to millions of borrowers affected by the foreclosure crisis.
The draft report contains five recommendations relating to the Board's oversight of the payment agreement and similar complex enforcement actions in the future. We are in general agreement with the recommendations and have begun taking steps to implement them, as outlined below.
The first recommendation is that the Division of Banking Supervision and Regulation (BS&R), the Division Of Consumer and Community Affairs (DCCA) and the Legal Division (Legal) (collectively, the Divisions) develop a framework to guide planning, vetting, and approving activities for large, complex enforcement strategies that may involve multiple institutions, multiple Board divisions, or multiple Reserve Banks. Board staff significantly expanded its planning and monitoring efforts during the course of the payment agreement and will continue to devote resources to overseeing the remaining requirements of the enforcement actions. Staff is also working on planning documents for possible steps to end the process for paying in-scope borrowers. We expect that this documentation will address the appropriate planning and risk assessment factors set out in recommendation one. We plan to leverage information learned throughout the IFR process and implementation of the payment agreement to ensure an appropriate level of planning, vetting, and approving activities for similar complex enforcement actions in the future.
The second recommendation is that the Divisions identify the circumstances in which project management resources should be used and develop a staffing plan to include project management resources with appropriate subject-matter expertise for those situations. Although project management resources were not available to assist Board staff in planning and implementing the IFR and the transition to the payment agreement, BS&R recently assigned staff with project management expertise to help finalize and implement our plan to end the process for paying in-scope borrowers. We agree that project management resources can add value and we will integrate available project management resources with appropriate subject-matter expertise when staffing similar complex enforcement actions in the future.
The third recommendation is that the Divisions assess the potential impact of data reliability issues as part of the complex enforcement strategies framework described in recommendation one. As the report noted, to provide timely relief to borrowers, the terms of the payment agreement contained tight timeframes that did not permit intensive advance planning. However, these terms did include provisions to address data integrity issues without disadvantaging individual borrowers. As stated in response to recommendation one, we plan to leverage information learned throughout the IFR process and implementation of the payment agreement when planning for similar complex enforcement actions in the future, which would include addressing the potential impact of any data reliability issues as warranted.
The fourth recommendation is that the Divisions finalize an approach to end the payment agreement, including developing,in coordination with the OCC, a strategy to appropriately allocate any funds remaining in the qualified settlement funds (QSFs) that have not been cashed or deposited by borrowers, and continuing efforts to locate uncompensated borrowers. We have already begun working on a plan to end the process for paying in-scope borrowers, including continuing efforts to locate uncompensated borrowers and to appropriately allocate any funds remaining in the QSFs, and have been in discussions with the OCC. As stated in response to recommendation two, we have engaged project management resources to help finalize and implement our plan.
Finally, you recommended that the Divisions,as part of future agreements involving payments to harmed consumers, identify potential options for distributing any residual amounts as part of the planning process. In similar complex enforcement actions in the future, we plan to consider potential options for distributing any residual amounts as part of the planning process.
Thank you, again, for the opportunity to provide comments to this report.
Michael S. Gibson /signed/
Division of Banking Supervision and Regulation
Eric S. Belsky /signed/
Division of Consumer and Community Affairs
Scott G. Alvarez /signed/