Lawmakers push bank regulators to transparency about settlement

Senator Elizabeth Warren and Representative Elijah Cummings wrote a letter to bank regulators this week asking for transparency and accountability about how the government reached a settlement agreement with the nation’s 13 largest mortgage servicing companies.

The settlement is intended to compensate homeowners who were improperly foreclosed upon by banks that were using hasty, automated methods to accomplish thousands of foreclosures quickly. The lawmakers wrote to the chairman of the Federal Reserve and to the head of the Office of the Comptroller of the Currency to ask for documentation about the settlement agreement.

Regulators ended a more extensive investigation into the conduct of the mortgaging servicing companies when the deal was reached, essentially because the task of continuing the review was time consuming and expensive. Consumer advocates like Senator Warren are concerned that without a full review of the records associated with all of the foreclosures homeowners will not be compensation fairly and banks will get away with a lower overall settlement amount that they would have if the damage had been fully calculated. This is the big reason why lawmakers are pushing for transparency in the process.

Warren and Cummings are the only lawmakers with concerns about the settlement. The ranking Democrat on the House financial Services Committee, Maxine Waters, also sent a letter to the Federal Reserve and the OCC. Waters wrote that she still had questions about the settlement and the choice that regulators made to end the case-by-case review of the big bank’s foreclosure practices.

Money from the settlement will offer much needed relief to borrowers who lost their homes to foreclosure and suffered from damage to their credit histories as a result of the mortgage servicers misconduct.

Source: Bloomberg, “Senate’s Warren Seeks Regulator Records on Foreclosure Deal,” Jesse Hamilton, Jan. 31, 2013.