Foreclosed borrowers will be able to lodge complaints about their lender and seek a review of their case under recent consent orders issued against the 14 top servicers, a senior regulator said Monday.

Speaking at ASR sister publication American Banker's regulatory symposium, John Walsh, the acting comptroller of the currency, said cases will be reviewed by an independent consultant, who based on the findings may require a servicer to develop a remediation plan. Each remediation plan will be subject to approval by the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board. A review may also result in a bank paying restitution.

"As we explored the best means of ensuring that injured homeowners had the opportunity to seek relief, it became clear that what was needed was a robust, transparent, and accessible complaint process that will give borrowers the opportunity to request an independent foreclosure review," Walsh said. "I'm happy to say in the next several weeks you'll see the roll out of just such a process."

Also addressing the symposium, Martin Gruenberg, the acting Federal Deposit Insurance Corp. (FDIC) chairman, announced several initiatives to address challenges faced by community bankers. The agency will hold a conference next year on the future of community banking, the FDIC's research division will study how community banks have evolved in the past two decades and Gruenberg said he will hold regional roundtables with community bankers around the country.

"The FDIC is also reviewing key challenges facing community banks such as raising capital, keeping up with technology, attracting qualified personnel, and meeting regulatory obligations,"

Gruenberg, who was nominated by the Obama administration to become the permanent FDIC chairman, said in his first public remarks since taking the acting job. "Additionally, we are looking at our own risk-management and compliance supervision practices to see if there are ways to make the process more efficient" for community banks.

The April consent orders against the large mortgage servicers were in response to alleged borrower mistreatment from flawed documentation and other problems in the foreclosure process. The orders require each servicer to submit an action plan and implement an independent foreclosure review to identify borrowers who were harmed as a result of foreclosure-related errors.
Walsh said any remediation and restitution required of banks through the new complaint process will likely vary by each case.

"Remediation and restitution will not be approached as a one-size-fits-all proposition," Walsh said. "It will depend on the facts of the individual case and that requires thorough and careful consideration, as well as a strong quality control process to ensure each institution is treating cases of financial harm in a consistent way."

To inform the public about the complaint process, Walsh said borrowers with a foreclosure either pending or completed between Jan. 1, 2009, and Dec. 31, 2010, will be contacted through direct mailings as well as a coordinated advertising campaign by the independent consultants who will be carrying out the reviews. The consultants will use a claims processing vendor to create a Web site and phone number for eligible homeowners to request a review.

A review could take several months, and a letter will be provided to the parties involved explaining the outcome and providing information about restitution, Walsh said.

"All of this takes time, and the full effect, full cost, and full benefit of remediation will be known only at the end," he said.

Meanwhile, Walsh said the OCC is still cooperating with other federal and state officials, including the Department of Justice and state attorneys general, on a comprehensive set of servicing requirements.

"I continue to believe that we will be able to harmonize the mortgage servicing requirements in our orders with those of other regulators if and when they are reached," he said. "In fact, I think it is absolutely essential that we do so."

Asked about reports of ongoing problems with foreclosure documentation, Walsh said, "We will not tolerate the process continuing going forward. So if we find any evidence of that, that will certainly be part of … enforcement."

In his remarks, Gruenberg said even though most of the institutions recently put into an FDIC receivership are small, the bulk of the nation's community banking sector remains strong.

"Of the 395 FDIC-insured institutions that have failed during the crisis, more than 300 have been community banks," he said. "Still, the large majority have come through this crisis in good shape. They remain viable and provide a wide range of critical services for their communities."

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