Monday, July 7, 2014
RUST CONSULTING'S ROLE IN THE INDEPENDENT FORECLOSURE REVIEW PROCESS
Excerpted from the Federal Reserve Board,
The Request for Review Process and Related Data
The regulators required that each servicer implement a process for the receipt and review of borrower claims and complaints. Borrowers who believed they
were financially harmed during the foreclosure process by their servicer’s errors were able to request an independent review if a foreclosure action was initiated, pending, or completed during 2009 or 2010 on a mortgage loan on their primary residence.
To carry out its role as the IFR administrator, Rust worked with the servicers to obtain key borrower data and information for in-scope borrowers, includ-
ing borrowers’ names, loan numbers, property addresses, and current mailing addresses. Broad out-reach by mail and mass media was used to raise
awareness of the IFR. Outreach efforts to borrowers of 14 of the 16 servicers under Consent Orders were launched on November 1, 2011, when Rust mailed letters about the IFR, including an RFR form, to more than 4.4 million borrowers who were identified as potentially eligible for an independent review. Because Goldman Sachs and Morgan Stanley entered into Consent Orders after the other servicers, these two servicers were still in the process of implementing outreach procedures when they entered into the Payment Agreement.
Additionally, the regulators conducted outreach sessions targeted to housing counseling agencies to increase program awareness and promote borrower
participation. These sessions included two webinars (on February 29, 2012, and March 6, 2012) moderated by the independent consultants, with participa-
tion from the regulators, to provide information on the process for requesting a review and to train counselors on how to help borrowers complete the RFR
form. The webinars attracted over 1,100 housing counselors and legal professionals via online streaming and phone conference bridges. Over 80 percent of the webinar survey respondents found that the webinar training presentations were well organized, met their information needs, and improved their understanding of the RFR form. The Federal Reserve posted the webinar video on its public website, and from March 6 through December 31, 2012, the page where the webinar was posted had been visited over 2,200 times. In addition to the webinars, the Federal Reserve produced videos in English and Spanish explaining the IFR and posted them on its public website and on YouTube. A link to these videos was also published on the Federal Reserve’s Twitter feed to expand outreach efforts through social media channels. In the first week of the release, there were 4,300 views of the YouTube video. In total, through December 31, 2012, the Federal Reserve video was viewed over 51,000 times in English and over 9,500 times in Spanish, and the same video on YouTube received over 8,600 views in English and over 2,300 views in Spanish. Federal Reserve staff also participated in outreach events held in local Federal Reserve Bank Districts to discuss the IFR process with local
housing counseling groups.
The borrower outreach was expanded in 2012 to include more targeted approaches to reaching borrowers during which the regulators made substantial efforts to maximize the likelihood that all affected
borrowers would receive an RFR form and understand IFR communications. For example, the regulators initially consulted with the U.S. Department of
Justice, which has conducted litigation settlement outreach to large numbers of affected persons, for guidance on enhancing the borrower outreach pro-
cess and covering a broader spectrum of non-English speakers. In connection with these consultations, the regulators took several significant steps to expand borrowers’ understanding of the mailings, such as information about the IFR call center into seven non-English languages that the regulators
were advised were likely to be spoken by borrowers, including Spanish, Chinese, Korean, Hmong, Tagalog, Vietnamese, and Russian. In addition, the IFRcall center, managed by Rust, was capable of providing interpretation services and assistance in over 200 languages.
To facilitate reaching as many borrowers as possible, on August 15, 2012, the regulators convened a meeting of servicers, independent consultants, media
firms, and community-based organizations with experience in outreach to diverse borrower populations. With the benefit of the ideas shared during the
meeting, the regulators instructed servicers to develop new outreach strategies that included additional borrower mailings, television and radio cam-
paigns, and an expanded print media campaign. At this juncture, as with other developments throughout the IFR process, and when requested, briefings were
held with members of Congress and congressional staff.
A third webinar was held on October 16, 2012, to provide more information about the foreclosure file review process. It was mainly attended by local hous
ing nonprofit organizations. In total, over 900 people registered and over 550 phone lines were used. The survey response results revealed that 89 percent of
survey respondents thought that the webinar was a good investment of their time. The deadline for submitting RFRs was extended multiple times from the original deadline of April 30, 2012, to December 31, 2012, the last and final deadline. The deadline extensions provided more time to increase awareness about the IFR, share information about how eligible borrowers could request a review, and encourage the broadest participation possible. The Federal Reserve released data on the IFR mailings and responses received as of December 31, 2012, by geographic location, on its public website.
The data reflect the number of borrowers meeting the initial eligibility criteria who were mailed RFRs (“mailings”) and those who returned completed RFRs
(“responses”) by geographic location. The figures for mailings and responses do not represent the total number of financially injured or remediated borrow-
ers; rather, they offer a snapshot of borrower outreach mailings and responses using property addresses. The data were collected by Rust and reflect all RFRs received as of the December 31, 2012, deadline, at which time nearly 500,000 borrowers out of the total eligible population of more than 4.4 mil-
lion had submitted RFRs.
Further analysis of the RFR forms mailed and received revealed that a majority were concentrated in areas that were hardest hit by the housing crisis.
These areas were identified by the U.S. Department of the Treasury as areas that, beginning in February 2010, had unemployment rates at or above the
national average or house prices that had fallen more than 20 percent since the housing market downturn.For example, counties in California, Arizona,
Nevada, and Florida received and returned a sizable share of the mailings.
Borrowers were not required to provide personal data on race, ethnicity, or income in the RFR form, so that type of data is not available. However, borrower address data were geocoded using 2010 U.S. Census Bureau data, which were used as a proxy for the probable income level and minority representation of borrowers who submitted RFRs compared with those who did not. Response rates within low- or moderate-income census tracts and high minority census tracts revealed that borrowers residing in these
census tracts are comparably represented in the population of borrowers that submitted RFR forms.
Financial Injury Guidance
The primary objective of the IFR, as set forth in the Consent Orders, was to identify financial injury or harm to borrowers caused by servicer errors, misrepresentations, or other deficiencies, and to provide a general level of remediation for different classes of deficiencies, as appropriate. In June 2012, the regulators developed and released a financial remediation
framework that provided nonexclusive examples of situations where specific compensation amounts or other remedial action were required for direct finan-
cial injury due to 13 different categories of servicer errors (the “Financial Remediation Framework”). The nature of the required remediation varied
depending on whether the borrower’s foreclosure was in process, completed, or rescinded when the remediation occurred. The regulators also issued extensive guidance in the form of frequently asked questions relating to application of the Financial Remediation Framework, which was periodically updated as additional issues arose.
Remediation under this framework was not intended to fully redress all harm suffered by a borrower and did not take into account factors such as emotional distress or other indirect injury that borrowers may have experienced during
the foreclosure process, as such factors can be very difficult to quantify.
Under the Consent Orders, the independent consultants were directed to use the Financial Remediation Framework to recommend remediation for servicer
errors identified during the IFR, including those errors identified in files of borrowers who submitted RFR forms. The servicers were required to prepare
remediation plans based on the independent consultants’ recommendations. The remediation plans would have been submitted to the regulators for
approval prior to implementation.
Note: The editor of this blog has filed two FOIA requests with the Office of the Comptroller of the Currency seeking detailed information regarding a payment of $2,000 sent to the editor by Rust Consulting. Frank D Vance, Jr. responded and referred the editor to query Rust Consulting and Chase at the addressses listed below as well as to these links:
Rust Consulting, Inc.
Special Handling Department
PO Box 3014
Faribault, MN 55021
Chase Executive Office
800 Tech Center Drive, Floor 1
ATTN: Chuk Pursh - IFR
Gahanna, OH 43230