After months of pressure from Congress and consumer advocates, the Federal Reserve Board released new details Monday about how mortgage servicers plan to follow regulatory directives that they improve their foreclosure systems.
The Fed and the Office of the Comptroller of the Currency (OCC) issued orders in April requiring the 14 largest servicers to address deficiencies in their foreclosure practices and hire independent consultants to investigate past foreclosure errors.
The Fed's release included a redacted version of an exhaustive letter from one of the consultants, PricewaterhouseCoopers, to SunTrust Banks outlining what the company's foreclosure review will entail. (The Fed regulates SunTrust's bank subsidiary.)
Although the Fed had faced criticism for not releasing details earlier — the OCC released 12 engagement letters last year for the servicers it oversees — and the central bank did not release a letter to the other servicer it oversees, Ally Bank, the agency in some respects went further than the OCC.
As the federal regulator of all holding companies, the Fed also included detailed action plans that eight of the 14 companies will carry out to comply with the orders.
"The Federal Reserve will closely follow the implementation of action plans to ensure that the financial institutions correct deficiencies and evaluate any harm that was done to homeowners in the foreclosure process in 2009 and 2010," the agency said in a press release.
Similar to the letters released by the OCC, the SunTrust letter outlines Pricewaterhousecooper's responsibilities and obligations as the independent consultant.
The consulting firm said it expects to evaluate 10,748 of SunTrust's loan files, including approximately 6,000 files in which the borrower requested a review and 1,000 cases where SunTrust denied requested modifications of loans owned by the government-sponsored enterprises.
"You are engaging to provide the professional consulting services outlined below," the letter says. "We are not providing, and shall at no time provide, any legal advice or legal opinions in connection with this engagement."
A spokeswoman for the central bank said the letter to Ally was still being finalized.
The eight action plans, which are each hundreds of pages and are also redacted, were filed by Wells Fargo & Co., Bank of America Corp., JPMorgan Chase & Co., Citigroup, U.S. Bancorp, MetLife, PNC Financial Services Group and EverBank. They describe the steps the companies have taken or plan to take to improve governance, oversight and risk management, as well as the business model of its mortgage subsidiaries.
For example, Citi said it planned to hire 800 new employees in its mortgage division to improve servicing processes. BofA said it plans to develop new standards for the internal audit program designed to evaluate its servicing platform. Many of the plans also include charts with detailed metrics identifying which actions have been taken, which are in progress and which have yet to be started.
"The Federal Reserve anticipates that more engagement letters and action plans will be posted soon," the agency said in the press release.
In addition to action plans required by the holding companies, the consent orders required that the companies' servicing subsidiaries also submit plans — subject to regulatory approval — that describe how the banks will strengthen communications with borrowers and improve controls for third-party vendors, among other requirements.