WASHINGTON – Lawmakers on Thursday asked bank regulators to turn over documents related to the $8.5 billion settlement that ended a government-mandated review of crisis-era foreclosures, saying transparency was needed to boost confidence in the settlement.
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Senator Elizabeth Warren and Representative Elijah Cummings, both Democrats, said the Federal Reserve and the Office of the Comptroller of the Currency (OCC) must address concerns that financial institutions have not been held accountable for misdeeds during the 2007-2009 U.S. financial crisis.
In a separate letter also released on Thursday, Representative Maxine Waters, also a Democrat, said questions remain about why the independent reviews were stopped and how borrowers will be evaluated for potential compensation.
The case-by-case reviews of foreclosures came in response to the "robo-signing" scandal of 2010, in which banks were said to have used defective or fraudulent documents to pursue home foreclosures.
But after the review process got expensive without resulting in relief to consumers, regulators opted for a different approach.
They said settlements with mortgage servicers, which were announced earlier this month would replace the reviews with a broader framework that allows borrowers to receive compensation regardless of whether they faced actual harm.
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"We believe that public confidence in the settlement - the confidence necessary to speed recovery of the housing markets - will exist only if the OCC and the Federal Reserve provide additional transparency into the process used and information gathered during the Independent Foreclosure Review process," Warren and Cummings said in their letter.
Cummings was critical of the settlement when regulators announced it earlier this month and said the OCC and the Fed had not sufficiently answered questions, such as who would get the funds.
The financial industry has been closely watching Warren since she won election to the U.S. Senate in November.
She gained a reputation as an opponent of Wall Street excess by overseeing the financial system bailout and later setting up the Consumer Financial Protection Bureau, and she would lend a high profile to whatever issue she chooses for her first big push as a lawmaker.
The pair called on regulators to turn over documents on the independent contractors who reviewed borrower files, the total number of reviews undertaken by each contractor and the number of files in which unsafe practices were found.
Waters, who is the top Democrat on the House of Representatives Financial Services Committee, criticized the sudden end of the reviews and asked the regulators to establish an independent monitor to oversee the settlement process.
Both letters were addressed to Fed Chairman Ben Bernanke and Comptroller of the Currency Thomas Curry.
The initial settlement called for Bank of America Corp, Citigroup Inc, JPMorgan Case & Co, Wells Fargo & Co, MetLife Bank, and five others to pay $3.3 billion directly to eligible borrowers, and $5.2 billion in loan modifications and forgiveness.
Separately, HSBC, Goldman Sachs and Morgan Stanley also reached similar settlements, bringing the total payout to $9.3 billion.
(Reporting By Emily Stephenson and Margaret Chadbourn; Editing by Kenneth Barry)