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Foreclosure Settlement With Banks Questioned by U.S. Lawmakers

Leaders of the House Oversight and Government Reform Committee are questioning a settlement pending between U.S. banking regulators and mortgage servicers to close a years-long review of mortgage servicers’ foreclosure misdeeds.

Committee Chairman Darrell Issa, a California Republican, and the panel’s ranking Democrat, Elijah Cummings of Maryland, sent a letter to the Office of the Comptroller of the Currency and Federal Reserve today asking for more information about how homeowners would be affected by a proposed settlement with 14 mortgage servicers, including JPMorgan Chase & Co., (JPM) Bank of America Corp. and Citigroup Inc.. (C)

“We respectfully request a staff briefing prior to the conclusion of the reported settlement agreement,” the lawmakers wrote in the letter. “We would like more information about how the potential settlement amount is to be determined in light of potential wrongdoing identified to date, how such aid may be distributed and in what form, and what may happen to homeowners’ files that are still awaiting review.”

The servicers were ordered by the OCC and other banking regulators in 2011 to clean up their foreclosure practices and hire independent consultants to see whether they treated customers unfairly in 2009 and 2010. Federal regulators are set to replace that existing victim-by-victim compensation effort with about $10 billion in flat penalties, according to five people briefed on the talks who asked not to be named because the discussions are private.

About 495,000 borrowers applied by the Dec. 31 deadline to have their foreclosure histories examined for missteps in response to letters sent by regulators to 4.4 million potential claimants. Another 159,000 foreclosures were chosen in a sampling process, according to the OCC. None of the borrowers have been compensated so far.

To contact the reporter on this story: Jesse Hamilton in Washington at jhamilton33@bloomberg.net; Cheyenne Hopkins in Washington at chopkins19@bloomberg.net

To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net.

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