This is the accessible text file for GAO report number GAO-12-776 
entitled 'Foreclosure Review: Opportunities Exist to Further Enhance 
Borrower Outreach Efforts' which was released on July 5, 2012. 

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as 
part of a longer term project to improve GAO products' accessibility. 
Every attempt has been made to maintain the structural and data 
integrity of the original printed product. Accessibility features, 
such as text descriptions of tables, consecutively numbered footnotes 
placed at the end of the file, and the text of agency comment letters, 
are provided but may not exactly duplicate the presentation or format 
of the printed version. The portable document format (PDF) file is an 
exact electronic replica of the printed version. We welcome your 
feedback. Please E-mail your comments regarding the contents or 
accessibility features of this document to Webmaster@gao.gov. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

June 2012: 

Foreclosure Review: 

Opportunities Exist to Further Enhance Borrower Outreach Efforts: 

GAO-12-776: 

GAO Highlights: 

Highlights of GAO-12-776, a report to congressional requesters. 

Why GAO Did This Study: 

In April 2011 consent orders, the Office of the Comptroller of the 
Currency (OCC), Federal Reserve, and the Office of Thrift Supervision 
directed 14 mortgage servicers to engage third-party consultants to 
review 2009 and 2010 foreclosure actions for cases of financial injury 
and provide borrowers remediation. To complement these reviews, the 
regulators also required servicers to establish an outreach process 
for borrowers to request a review of their case. This report examines 
(1) the extent to which the development of the outreach approach and 
content of the communications materials and website reflected best 
practices, and (2) the extent to which the planning and evaluation of 
the outreach and advertising approach considered the characteristics 
of the target audience. To conduct this work, GAO reviewed the design 
and implementation of borrower outreach activities and materials 
against best practices and federal guidelines and interviewed 
representatives of servicers, consultants, community groups, and 
regulators. 

What GAO Found: 

What GAO Found
Regulators and servicers have gradually increased their efforts to 
reach eligible borrowers and have taken steps to improve communication 
materials. Conducting readability tests or using focus groups are 
generally considered best practices for consumer outreach, but 
regulators and servicers did not undertake these activities. Staff at 
the Board of Governors of the Federal Reserve System (Federal Reserve) 
said that this was, in part, a trade off to expedite the remediation 
process. Regulators also did not solicit input from consumer groups 
when reviewing the initial communication materials. Readability tests 
found the initial outreach letter, request-for-review form, and 
website to be written above the average reading level of the U.S. 
population, indicating that they may be too complex to be widely 
understood. Regulatory staff noted limitations to such readability 
tests and told us they discussed using plain language, but that the 
use of some complex mortgage and legal terms was necessary for 
accuracy and precision. Clear language on the independent foreclosure 
review website is particularly important as current outreach 
encourages borrowers to submit requests for review online. 
Communication materials developed by mortgage servicers with input 
from regulators and consultants included information about the 
purpose, scope, and process for the foreclosure review and noted that 
borrowers may be eligible for compensation. However, the materials do 
not provide specific information about remediation—-an important 
feature to encourage responses as suggested by best practices and 
reflected in notification examples GAO reviewed. Without informing 
borrowers what type of remediation they may receive, borrowers may not 
be motivated to participate. 

The outreach planning and evaluation targeted all eligible borrowers 
with some analysis conducted to tailor the outreach to specific 
subgroups within the population. In approving the outreach plan, 
regulators considered the extent to which the plan promoted national 
awareness and was appropriate to reach the demographics of the target 
audience. The outreach process was largely uniform with some targeted 
outreach to Spanish-speaking and African-American borrowers. GAO has 
previously found that effective outreach requires analysis of the 
audience by shared characteristics, but regulators did not call for 
servicers to analyze eligible borrowers by characteristics, such as 
limited English proficiency, that may have affected their response. 
While regulators have identified community groups as effective 
messengers and encouraged servicers to reach out to them, servicers 
have leveraged these groups to varying degrees. According to consumer 
groups, borrowers may have ignored communication materials because 
they did not understand who provided the information and believed the 
materials were fraudulent. Regulators regularly monitored the status 
of the outreach activities and analyzed the effect of advertising on 
response rates. GAO has previously found that analyzing past 
performance when expanding activities is important. Regulators did not 
analyze characteristics of respondents and nonrespondents in 
introducing a second wave of outreach activities. Without this 
analysis, regulators may not know if certain groups of borrowers are 
underrepresented in the review. As a result, whether additional 
outreach to target these groups or changes to the file review process 
are needed to help ensure that all borrowers have a fair opportunity 
for review is unclear. 

What GAO Recommends: 

OCC and the Federal Reserve should enhance the language on the 
foreclosure review website, include specific remediation information 
in outreach, and require servicers to analyze trends in borrowers who 
have not responded and, if warranted, take additional steps to reach 
underrepresented groups. In their comment letters, the regulators 
agreed to take actions to implement the recommendations, while the 
Federal Reserve took issue with GAO’s criteria. OCC also took issue 
with GAO’s criteria in its technical comments. 

View [hyperlink, http://www.gao.gov/products/GAO-12-776]. For more 
information, contact Lawrance L. Evans, Jr. at (202) 512-8678 or 
evansl@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

While the Outreach Efforts Have Improved over Time, Opportunities 
Exist to Enhance Readability and Content of the Communication 
Materials: 

Outreach Was Based on Limited Analysis of Eligible Borrower Subgroups: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Comments from the Office of the Comptroller of the 
Currency: 

Appendix III: Comments from the Board of Governors of the Federal 
Reserve System: 

Appendix IVGAO Contact and Staff Acknowledgments: 

Table: 

Table 1: Results of Whole Website Readability Analysis: 

Figures: 

Figure 1: Timeline of Key Deadlines in the Foreclosure Review Process: 

Figure 2: Initial Foreclosure Review Communication Materials: 

Figure 3: Proportion of the Adult Population with Limited English 
Proficiency, 2008-2010, and Key Markets Targeted by Servicers with 
Spanish-Language Advertising: 

Figure 4: Remediation Information in Initial Foreclosure Review and 
Sample Class Action Lawsuit Materials: 

Figure 5: Estimated Rates of Active Nonprime Loans in the Foreclosure 
Process by Congressional District, as of June 30, 2009: 

Abbreviations: 

FDIC: Federal Deposit Insurance Corporation: 

FJC: Federal Judicial Center: 

FOG: Frequency of Gobbledygook: 

HUD: U.S. Department of Housing and Urban Development: 

MSA: Metropolitan Statistical Area: 

NACA: National Association of Consumer Advocates: 

NFMC: National Foreclosure Mitigation Counseling: 

OCC: Office of the Comptroller of the Currency: 

OTS: Office of Thrift Supervision: 

SCRA: Servicemembers Civil Relief Act: 

SMOG: Simplified Measure of Gobbledygook: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

June 29, 2012: 

Congressional Requesters: 

In April 2011, the Office of the Comptroller of the Currency (OCC), 
the Board of Governors of the Federal Reserve System (Federal 
Reserve), and the Office of Thrift Supervision (OTS) announced consent 
orders against 14 residential mortgage servicers for unsafe and 
unsound practices in residential mortgage servicing and foreclosure 
processing.[Footnote 1] Among other things, these consent orders 
directed the servicers to engage third-party consultants to conduct a 
file review of the servicers' 2009 and 2010 foreclosure actions to 
evaluate whether borrowers suffered financial injury through errors, 
misrepresentations, or other deficiencies in servicers' foreclosure 
practices.[Footnote 2] Where a borrower suffered financial injury as a 
result of such practices, the regulators' orders require the servicers 
to provide borrowers with remediation. As an unprecedented step not 
found in prior enforcement actions, these consent orders also require 
servicers to establish a process to obtain and process consumer 
complaints. The regulators required servicers to establish such a 
process to complement the file review and enable eligible borrowers to 
request a review of their files if they believe they suffered 
financial injury as a result of the types of deficiencies in mortgage 
servicing and foreclosure processing identified in the regulators' 
consent orders. Taken together, these steps comprise the Independent 
Foreclosure Review (foreclosure review). The servicers developed a 
coordinated outreach plan to inform eligible borrowers of their 
opportunity to request a review of their foreclosure cases. OCC and 
the Federal Reserve have reported that approximately 95 percent of the 
4.3 million outreach letters sent to eligible borrowers were 
successfully delivered, and the response rate was approximately 5.3 
percent, as of June 2012. However, consumer groups and others have 
raised concerns about the outreach efforts. 

In response to your request, we reviewed the design and implementation 
of the borrower outreach process to determine how well information 
about the foreclosure review is being communicated to eligible 
borrowers with different characteristics. Specifically, this report 
addresses (1) the extent to which the development of the approach and 
content of the communication materials and website reflected best 
practices and (2) the extent to which the planning and evaluation of 
the outreach and advertising approach considered the characteristics 
of the target audience. This work represents the first phase of our 
review of the foreclosure review process. In a subsequent report, we 
will examine other elements of the foreclosure review process, such as 
the regulators' oversight of the file review process, that you 
requested. 

To address these objectives, we reviewed communication materials the 
regulators approved against best practices on the content of outreach 
notices, federal guidelines on plain language use, and criteria 
established in our previous reports related to planning outreach 
campaigns and testing communication materials. We also updated 
previous work on the geographic concentrations of the population with 
limited English proficiency and leveraged work we have done on 
characteristics of individuals associated with low financial literacy. 
We reviewed regulators' guidance to the servicers on setting up the 
outreach process and evaluated that guidance against criteria in a 
previous report on planning outreach campaigns. We compared the 
regulators' outreach campaign evaluation processes against criteria 
established in previous reports related to monitoring and evaluating 
communication materials and advertising activities. We conducted 
interviews with staff at OCC and the Federal Reserve and 
representatives of consumer and community groups. We also interviewed 
representatives of five mortgage servicers--including large and small 
servicers and at least one supervised by each regulator--and the third-
party consultants these servicers have hired for the foreclosure 
review process. 

We conducted this performance audit from February 2012 through June 
2012 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

Background: 

Mortgage servicers are the entities that manage payment collections 
and other activities associated with loans. Servicing duties can 
involve sending borrowers monthly account statements, answering 
customer-service inquiries, collecting monthly mortgage payments, and 
maintaining escrow accounts for property taxes and insurance. In the 
event that a borrower becomes delinquent on loan payments, servicers 
also initiate and conduct foreclosures. Several federal regulators 
share responsibility for regulating the banking industry in relation 
to the origination and servicing of mortgage loans.[Footnote 3] OCC 
has authority to oversee nationally chartered banks and federal 
savings associations. The Federal Reserve oversees insured state-
chartered banks that are members of the Federal Reserve System, bank 
holding companies, and entities that may be owned by federally 
regulated depository institution holding companies but are not 
federally insured depository institutions. The Federal Deposit 
Insurance Corporation (FDIC) oversees insured state-chartered banks 
that are not members of the Federal Reserve System and state-chartered 
savings associations.[Footnote 4] The Bureau of Consumer Financial 
Protection oversees many of these institutions, as well as all 
mortgage originators and servicers that are not affiliated with 
banking organizations, with respect to federal consumer financial law. 
[Footnote 5] 

Regulators Issued Consent Orders to Mortgage Servicers: 

Beginning in September 2010, several servicers announced that they 
were halting or reviewing their foreclosure proceedings throughout the 
country after allegations that the documents accompanying judicial 
foreclosures may have been inappropriately signed or notarized and 
after completion of self-assessments of their foreclosure processes 
that federal banking regulators directed them to conduct. In response, 
the banking regulators--OCC, the Federal Reserve, OTS, and FDIC--
conducted a coordinated on-site review of 14 mortgage servicers to 
evaluate the adequacy of controls over servicers' foreclosure 
processes and to assess servicers' policies and procedures for 
compliance with applicable federal and state laws. Regulatory staff 
told us that as part of these reviews, their examiners evaluated 
internal controls and procedures for processing foreclosures and 
reviewed samples of individual loan files to better ensure the 
integrity of the document preparation process and to confirm that 
files contained appropriate documentation. Examiners reviewed more 
than 2,800 loan files comprising approximately 200 foreclosure loan 
files with a variety of characteristics from each servicer to test the 
institutions' controls and governance processes with respect to 
foreclosures. Generally, the examinations revealed severe deficiencies 
in three primary areas: shortcomings in the preparation of foreclosure 
documentation; inadequate policies, staffing, or oversight of 
foreclosure processes; and insufficient oversight of third-party 
service providers, particularly foreclosure attorneys. 

On the basis of their findings from the coordinated review, OCC, the 
Federal Reserve, and OTS issued formal consent orders against each of 
the 14 servicers under their supervision in April 2011 (see figure 1). 
[Footnote 6] According to bank regulatory staff and these consent 
orders, each of the 14 servicers is required to enhance its 
compliance, vendor management, and training programs and processes. In 
addition, because examiners reviewed a relatively small number of 
foreclosure files, the consent orders require each servicer to retain 
an independent firm to conduct a review of foreclosure actions on 
primary residences from January 1, 2009, to December 31, 2010, to 
identify borrowers who suffered financial injury as a result of 
errors, misrepresentations, or other deficiencies in foreclosure 
actions, and to recommend remediation for borrowers, as appropriate. 
Servicers proposed third-party consultants to conduct the foreclosure 
review and submitted engagement letters outlining their foreclosure 
review processes to the regulators by July 2011 as required by the 
orders. OCC reviewed and approved the engagement letters for banks 
under its supervision in late September 2011 and released the 
engagement letters in November 2011 on the OCC website. With the 
exception of one institution, the Federal Reserve approved the 
engagement letters for servicers under its jurisdiction by February 
2012.[Footnote 7] 

Figure 1: Timeline of Key Deadlines in the Foreclosure Review Process: 

[Refer to PDF for image: timeline] 

September 2010: 
Due to allegations of inappropriately signed documents, several 
mortgage servicers stop foreclosure proceedings throughout the 
country.  

November 2010: 
Federal banking regulators begin on-site reviews of 14 mortgage 
servicers to evaluate adequacy of foreclosure processes.  

April 2011: 
Regulators issued formal enforcement actions against 14 servicers. 
They are required to hire third-party consultants, subject to 
regulator approval, to review the foreclosure  actions from January 1, 
2009, to December 31, 2010.  

June-July, 2011: 
Servicers submit engagement letters and action plans to regulators for 
review and approval. Consultants begin implementing processes laid out 
in engagement letters.  

November, 2011: 
Outreach letter and request-for-review form sent to borrowers. A 
website and toll-free number were also launched.  

January-February, 2012: 
First wave of national advertising campaign. 

April-May, 2012: 
Servicers launch second wave of advertising. 

April 30, 2012: 
Original  deadline for request-for-review form.  

June, 2012: 
Servicers send second mailing, a postcard, to eligible borrowers as a 
reminder to submit request-for-review forms. 

July 31, 2012: 
Extended deadline. 

September 30, 2012: 
New extended deadline. 

Source: GAO analysis of OCC and Federal Reserve documents. 

[End of figure] 

The Foreclosure Review Process: 

As required in the consent orders, the foreclosure review process has 
two components, a file review (look-back review) and a process for 
eligible borrowers to request a review of their particular 
circumstances (borrower outreach process). For the look-back review, 
the consent orders require the third-party consultant to submit an 
engagement letter outlining their plan for review subject to the 
regulators' approval. Consultants are required to review various 
categories of loans, pursuant to regulators' guidance and approval. 
These categories may vary by servicer but include, for example, files 
in every state where the institution conducted foreclosures, 
foreclosures where the borrower had a loan modification in place, or 
files that were handled by certain law firms where documentation 
errors have previously been found. The consent orders allow third-
party consultants to use statistical techniques to select samples of 
files from some categories of loans for review. As required in the 
consent orders, the engagement letters describe procedures consultants 
will use to increase the size of samples depending on the results of 
the initial reviews. Consultants are not allowed to use sampling, but 
instead must review 100 percent of files in some high-risk categories, 
including certain bankruptcy cases and files involving borrowers 
protected by the Servicemembers Civil Relief Act (SCRA).[Footnote 8] 
The Federal Reserve is also requiring 100 percent review of files in 
several additional high-risk categories, including foreclosure-related 
complaints filed before the borrower outreach process was launched, 
foreclosure actions where a complete request for a loan modification 
was pending at the time of the foreclosure, and foreclosure actions 
that occurred when the borrower was not in default. 

The second component of the foreclosure review, the borrower outreach 
process, is intended to complement the look-back review and help 
identify borrowers who may have suffered financial injury. According 
to regulatory documents and staff, the purpose of the outreach is to 
provide a robust process so that eligible borrowers who believe they 
suffered financial injury within the scope of the consent orders have 
a fair opportunity to request an independent review of their 
circumstances and, potentially, to obtain remediation. Regulatory 
staff noted that requiring institutions to hire a consultant to review 
files to identify the harmed pool of consumers as part of an 
enforcement action is typical. They said that including an outreach 
component in addition to a file review is unique and unprecedented in 
their experience. They also emphasized that the two components are 
intended to work together to provide a full and fair opportunity to 
identify as many financially injured borrowers as possible and the 
final results could not be fully evaluated until both the look-back 
file review and request-for-review process are completed. A Federal 
Reserve official testified that the borrower outreach process was 
critical to helping ensure that borrowers who suffered financial 
injury are identified and appropriately compensated.[Footnote 9] 
Acting Comptroller Walsh stated in a speech that the two processes 
combined are intended to maximize identification of and remediation 
for borrowers who have suffered financial injury as a result of the 
deficiencies identified in the orders.[Footnote 10] Consultants are 
required to review all eligible requests for review submitted through 
the borrower outreach process. 

To make eligible borrowers aware of the opportunity to request a 
foreclosure review, regulators required servicers to develop an 
outreach process. The servicers' borrower outreach plan includes 
multiple methods, including direct mail, print advertising, a toll-
free phone number, a website, online marketing, and engaging a third 
party for community outreach. Since the servicers had contact 
information for all of the eligible borrowers, direct mail was the 
primary outreach method chosen. On behalf of the participating 
servicers, a third-party administrator began mailing uniform outreach 
letters on November 1, 2011, to 4.3 million borrowers.[Footnote 11] 
These outreach letters describe the request-for-review process and 
include a request-for-review form for borrowers to complete and submit 
if they believe they suffered financial injury as described in the 
outreach letter (see figure 2). The third-party administrator took 
steps to update addresses of the eligible borrowers who may have lost 
their homes to foreclosure.[Footnote 12] A single, coordinated 
website, toll-free phone number, and national advertising campaign 
were launched in January and February 2012, to provide information 
about the request-for-review process. The regulators directed the 
servicers to develop their outreach plan in consultation with the 
third-party consultants and approved the plan. As of March 2012, 
borrowers may also submit requests for review via the independent 
foreclosure review website.[Footnote 13] The original deadline for 
submitting requests for review was April 30, 2012, but regulators 
decided in February to extend the deadline to July 31, 2012. On June 
21, 2012, regulators extended the deadline again to September 30, 
2012. A second round of national advertising occurred in April and May 
2012, and a third round is planned before the deadline. Additionally, 
a second mailing to eligible borrowers who have not responded is 
scheduled for June 2012. The mailing directs borrowers to call the 
toll-free phone number or access the independent foreclosure review 
website for information or to submit a request-for-review form. In 
addition to the servicers' coordinated efforts, regulators also have 
posted information about the foreclosure review on their agencies' 
websites and issued press releases. Further, OCC has distributed 
public service announcements to small publications and radio stations, 
and the Federal Reserve developed a video to inform borrowers about 
the review process. 

Figure 2: Initial Foreclosure Review Communication Materials: 

[Refer to PDF for image: illustration] 

Source: OCC, Federal REserve, and the Independent Foreclosure Review 
website. 

[End of figure] 

While the Outreach Efforts Have Improved over Time, Opportunities 
Exist to Enhance Readability and Content of the Communication 
Materials: 

As part of the outreach approach, the servicers formed a consortium to 
develop the initial outreach letter and request-for-review form with 
input from third-party consultants and approval from the regulators. 
The servicers and regulators did not test these communication 
materials with the borrowers or their community group advisers. 
Regulators consulted with and incorporated feedback from consumer 
groups on subsequent advertising and mailings to improve the format 
and clarity of current materials. However, according to 
representatives of these groups and our readability tests, the initial 
materials and the independent foreclosure website may be difficult for 
some borrowers to understand. In addition, the materials did not 
include specific information about the type of potential remediation 
borrowers could receive, which could affect borrowers' motivation to 
respond and submit a request for review. 

Communication Materials Could Impede Some Borrowers' Ability to 
Respond: 

Servicers formed a consortium to develop the initial communication 
materials, including the outreach letter and request-for-review form 
mailed to eligible borrowers. Because the consent orders did not 
outline the specifics of a borrower outreach process, regulators 
provided servicers and consultants guidance in July 2011 outlining 
their expectations for mailing notifications to eligible borrowers and 
national advertising, among other requirements. Representatives of 
servicers with whom we spoke told us that after receiving this 
guidance the servicers decided to form a consortium to develop a 
coordinated outreach process and uniform communication materials. A 
representative of one servicer and regulatory staff said that this 
approach would reduce potential confusion among borrowers that could 
result if each servicer had developed separate advertisements, 
websites, and outreach letters. Therefore, the servicers worked 
together to develop initial drafts of the communication materials, 
relying primarily on the expertise of their internal marketing 
departments and class action lawsuit notices as a model for notifying 
borrowers of the request-for-review process. The third-party 
consultants reviewed the communication materials and provided their 
input. After the consultants' review, the regulators also provided 
comments on the outreach plan and content of the communication 
materials and ultimately gave their final approval. 

Although servicers developed the initial communication materials with 
input from third-party consultants and regulators, the servicers and 
regulators did not test the materials with the target audience. Our 
previous reports and federal guidelines about using plain language in 
public documents have emphasized the importance of testing 
communication materials, such as conducting focus groups or assessing 
their readability, before implementing them. For example, in a 
previous report we have stated that consumer testing can validate the 
effectiveness of messages and information or measure readers' ability 
to comprehend them.[Footnote 14] We also have found that in order to 
develop clear and consistent audience messages, testing and refining 
language are important.[Footnote 15] The Plain Writing Act of 2010 
states that starting October 13, 2011, agencies must use plain writing 
when issuing new or substantially revised documents, including 
documents that explain to the public how to comply with a requirement 
that the federal government administers or enforces.[Footnote 16] The 
act defines "plain writing" as "writing that is clear, concise, well-
organized, and follows other best practices appropriate to the subject 
or field and intended audience." In addition, federal guidelines 
developed to help executive agencies implement the Plain Writing Act 
of 2010 state that testing documents, including applications and 
websites, should be an integral part of the plain-language planning 
and writing process, especially when writing to millions of people. 
[Footnote 17] Finally, the Securities and Exchange Commission's 
handbook for companies preparing required disclosure documents to 
investors in easy-to-understand language states that testing documents 
with a focus group can provide helpful feedback on how well the 
document communicates information and identify any confusing language. 
[Footnote 18] 

Representatives of one servicer and a consultant we interviewed said 
the consortium considered testing the communication materials with 
borrowers or conducting focus groups, but that the time frames were 
too short to take these steps and incorporate any changes by the 
November 2011 deadline by which regulators expected the outreach 
campaign to be launched. The servicer representative noted that 
because regulators provided guidance in July 2011 and initially 
expected an August 2011 launch, the servicers had only 60 days to 
develop the coordinated communication materials.[Footnote 19] 
According to this representative, conducting tests with focus groups 
could take 6 to 8 weeks. Federal Reserve staff said they wanted to get 
the outreach process started quickly so that financially injured 
borrowers could receive remediation as soon as possible. According to 
these staff, no formal readability tests or focus groups with the 
target audience were conducted, partly due to their interest in 
expediting the remediation process. However, they consulted with staff 
in the agency's Division of Consumer and Community Affairs for 
feedback on improving the communication materials to help ensure 
consumers could understand them. OCC staff also confirmed that no 
formal testing of the communication materials was conducted, but OCC 
also provided the materials to its Public Affairs and Community 
Affairs groups, which reviewed the materials for readability, and 
incorporated changes. 

Readability tests of the outreach letter and request-for-review form 
mailed to eligible borrowers and the website language indicate that 
these materials were written at a level above the reading proficiency 
of many borrowers. Federal plain language guidelines note that 
technical terms may be necessary, but that agencies should define them 
and avoid legal and technical jargon, where possible. At the same 
time, the guidelines state that agencies should take into account 
their audience's current level of knowledge when preparing documents 
and that the documents should be easy to understand. An assessment of 
the reading level of the U.S. population indicated that nearly half of 
the adult population is estimated to read at or below the eighth-grade 
level.[Footnote 20] We have previously reported that to help ensure 
that the complex information public companies are required to disclose 
is written in plain language and is understandable, the Securities and 
Exchange Commission recommends that materials be written at a sixth-to 
eighth-grade level.[Footnote 21] However, one consumer group conducted 
a readability test of the language in the communication materials 
mailed to eligible borrowers and found that they were written at a 
second-year college reading level.[Footnote 22] Because the scheduled 
second wave of mailings and advertising direct borrowers to the 
independent foreclosure review website to obtain more information 
about the review and submit a request-for-review form, we conducted 
readability tests of the language used in the online request-for-
review form. We used three tests that score how hard a piece of 
writing is to read based on quantitative measures, such as average 
number of syllables in words or numbers of words in sentences. One of 
these tests used the same method the consumer group used to evaluate 
the outreach letter and request-for-review form. These tests indicate 
that the website is written at an average of an eleventh-grade reading 
level, which is lower than the test results of the outreach letter and 
paper request-for-review form, but still above the average reading 
level of the U.S. population.[Footnote 23] Certain sections of the 
website required higher or lower reading levels to be understandable. 
For example, the legal section of the online submission form where 
borrowers acknowledge that they are requesting a review of their 
foreclosure and certify that the information is truthful were written 
at a fifteenth-grade level, the equivalent of 3 years of college 
education. However, one test indicated that the language used on the 
part of the form where borrowers input their contact information 
required only an eighth-grade reading level. As a whole, these tests 
are one indicator that portions of the foreclosure review 
communication materials may be too complex to ensure effective 
communication of all the relevant information. 

The readability tests have some limitations and regulatory staff told 
us that they considered plain language guidelines when evaluating the 
materials. We note that the readability ratings only reflect the 
length of sentences and the length in syllables of individual words in 
the sentences and do not reflect the complexity of ideas in a document 
or how clearly the information has been conveyed. As the content in 
these materials refer to mortgages, some complex terms and phrases, 
such as foreclosure and loan modification, may be unavoidable. 
Regulatory staff told us that they were aware of the plain language 
guidelines and discussed using plain language so that the materials 
were likely to be understood. For example, they noted that they did 
not include unnecessary legal and technical language, but said it was 
difficult to convey complex mortgage and legal terms in simple 
language that would still clearly and precisely present the intended 
message. Federal Reserve and OCC staff noted that to the extent the 
Plain Writing Act applies to the servicers' borrower outreach 
communication materials, they believed they had met the act's 
requirements. 

In addition to stating that agencies should take the audience's 
current level of knowledge into account, federal guidelines on using 
plain language also state that agencies should use language the 
audience knows and feels comfortable with when creating documents, 
including websites. Representatives of consumer groups we interviewed 
expressed concern about the initial lack of materials available in 
languages other than English. According to 2008-2010 Census Bureau 
American Community Survey data, about 12.7 million adults in the 
United States--5.5 percent of the total U.S. adult population--
reported speaking English not well or not at all.[Footnote 24] In 
addition, as shown in figure 3, populations with limited English 
proficiency tend to be more concentrated in certain parts of the 
country. To the extent that these concentrations are also in areas 
with high numbers of foreclosures that servicers did not target with 
Spanish-language advertising, limited English proficiency could affect 
borrowers' ability to complete their request-for-review form. We have 
previously reported that a lack of proficiency in English can affect 
financial literacy--the ability to make informed judgments and take 
effective actions on the current and future use and management of 
money.[Footnote 25] This report also stated that limited English 
proficiency can be a significant barrier to completing applications 
(such as the request-for-review form), asking questions about 
additional fees on credit card statements or correcting erroneous 
billing statements, and accessing educational materials such as print 
advertising or websites that are not available in languages other than 
English. Further, this report noted that having limited proficiency in 
English exacerbates the challenges of understanding complex 
information in financial documents. This report also acknowledged that 
factors other than language often serve as barriers to financial 
literacy for people with limited English proficiency, including a lack 
of familiarity with the U.S. financial system, cultural differences, 
mistrust of financial institutions, and income and education levels. 
Federal Reserve staff said that they required the servicers to handle 
the borrower outreach communication with non-English speaking 
borrowers in accordance with the servicers' existing policies and 
procedures pertaining to such borrowers, which must comply with 
existing laws and regulations. However, because the initial 
communication materials were not available in languages other than 
English, borrowers with limited English proficiency may not have had 
the same opportunity as proficient English speakers to request a 
foreclosure review. 

Figure 3: Proportion of the Adult Population with Limited English 
Proficiency, 2008-2010, and Key Markets Targeted by Servicers with 
Spanish-Language Advertising: 

[Refer to PDF for image: illustrated U.S. map] 

Map depicts areas with the following: 

Proportion of adults with limited English proficiency: 
Less than 5%; 
5 to less that 10%; 
10 to less than 20%; 
Greater than or equal to 20%. 

Source: GAO analysis of 2008 to 2010 Census American Community Survey 
data; MapInfo (map); and advertising from OCC and Federal Reserve. 

Note: This map does not reflect OCC's public service advertisement 
efforts. According to OCC staff, to supplement the servicers' outreach 
efforts, OCC released a series of English and Spanish public service 
announcements, including a print article released to local newspapers 
and publications and two 30-second radio spots to small radio stations 
throughout the country and media outlets serving audiences who speak 
languages other than English and Spanish. 

[End of figure] 

Regulators did not initially solicit input from consumer and community 
groups when evaluating the language used in the communication 
materials but have since taken steps to address these groups' 
concerns. Representatives of several consumer and community groups we 
interviewed said that they have direct experience working with 
distressed borrowers or in developing national outreach campaigns. 
Regulators acknowledged that they initially did not obtain input from 
these groups when evaluating the early communication materials, but 
they have since held several meetings with selected groups to obtain 
their feedback on the outreach process and requested feedback from 
them on the current advertisements and mailings, as well as certain 
prior communications. For example, Federal Reserve and OCC staff noted 
that both regulators incorporated feedback from these groups to 
enhance readability, include more Spanish translations, and improve 
how borrowers might respond to second print advertisement and the 
content and the exterior of the second mailing. Regulators also made 
changes to increase accessibility for non-English speaking borrowers 
that are consistent with the feedback from consumer groups, such as 
requiring servicers to add frequently asked questions and a guide to 
filling out the request-for-review form in Spanish to the independent 
foreclosure review website. In addition, regulatory staff said they 
required servicers to include references to available assistance in 
other languages at the call center on the independent foreclosure 
review website and in communication materials.[Footnote 26] 

The regulators also have taken their own initiative to enhance the 
communication materials. For example, they have posted on their 
agencies' websites an archived version of the two webinars they hosted 
to educate community groups that assist borrowers with housing issues 
about the foreclosure review process as well as English and Spanish 
transcripts of the webinar. The agencies also consulted with the U.S. 
Department of Justice in December 2011 on the measures taken by the 
agencies to ensure that the independent foreclosure review is 
accessible to non-English speakers.[Footnote 27] In addition, the 
Federal Reserve released a YouTube video that provides information 
about the foreclosure review in Spanish and English. Further, OCC 
produced public service announcements and distributed them to more 
than 700 Spanish-language newspapers and 500 Spanish-language radio 
stations. Consumer group representatives involved in discussions about 
outreach with the regulators told us the recent improvements were 
positive, but said that they would like to see documents and 
information on the website offered in additional languages, language 
further simplified, and legal terms explained. For example, the 
webinar materials provide tips on how to answer request-for-review 
form questions that define terms, clarify questions, and indicate what 
additional documentation to reference; however, this information is 
not available on the independent foreclosure review website where 
borrowers are encouraged to submit their request-for-review forms. 

Although regulators have ensured that some Spanish language materials 
are available, these materials may still be difficult for Spanish-
speaking borrowers to understand. We have previously reported that in 
some cases even translations of materials may not be fully 
comprehensible if they are not written using colloquial or culturally 
appropriate language.[Footnote 28] In addition, a 2004 report by the 
National Council of La Raza noted that literal translations of 
financial education materials from English to Spanish are often 
difficult for the reader to understand.[Footnote 29] Federal Reserve 
staff acknowledged that some terms do not translate well, and said 
they consulted with two consumer groups with Spanish translation 
capability as well as native Spanish speaking staff in the Division of 
Consumer and Community Affairs for advice on terms to use. Our 
analysis of the Spanish guide to the request-for-review form available 
on the independent foreclosure review website indicated that the 
Spanish translation in the guide uses language similar in complexity 
to that of the English form, which we found requires a reading level 
higher than the national average. In addition, the English outreach 
letter is not translated, and some of the key information, such as the 
purpose of the review or the deadline for submitting the form, is not 
included in the cover of the Spanish guide, although regulatory staff 
noted that the deadline is included in bold text on the second page of 
the guide. Further, some of the terms and phrases that have been 
translated literally may be difficult to understand. For example, the 
term eligible is used in the English and Spanish documents, but this 
term has a different meaning in each language. In Spanish, "eligible" 
means "available" (that is, an option one is allowed to choose), 
rather than "qualified to participate or be chosen" as it indicates in 
English. Further, the Spanish word "administrador" is used to refer to 
both the mortgage servicer and the third-party administrator 
collecting request-for-review forms on the servicers' behalf, which 
could be confusing given the different roles of these two entities and 
that the review process is intended to be independent of the servicer. 
Regulatory staff said that to distinguish between the two functions, 
the term is capitalized when referring to the third-party 
administrator. Further, because Spanish readers must refer to the 
guide and the English form simultaneously, they could make mistakes in 
recording information on the English form. According to regulator 
guidance to consultants, if borrowers do not select any specific areas 
of financial injury but sign the request-for-review form and provide 
current contact information, consultants will review the case for all 
types of financial injury. However, if borrowers select areas of 
financial injury on their request-for-review forms, consultants will 
review those areas specifically, so mistakes in filling out the form 
could affect which aspects of borrowers' foreclosure cases the 
consultants review. 

Limited Remediation Information May Affect the Response Rate: 

The content of the foreclosure review communication materials includes 
general information about the nature and terms of the request-for-
review process. The communication materials follow regulators' 
guidance on the content of the materials issued to borrowers, which 
includes why the borrower is being contacted, how eligibility will be 
determined, how borrower information needed will be collected to 
conduct the foreclosure review, how borrowers may contact their 
servicer, and when to expect a response. For example, to describe the 
nature of the foreclosure review process, the letter states that the 
purpose is to identify customers who may have been financially injured 
due to errors, misrepresentations, or other deficiencies during the 
foreclosure process. To identify the borrowers affected, the outreach 
letter states the eligible population of customers is borrowers whose 
primary residence was in foreclosure between January 1, 2009, and 
December 31, 2010. Additionally, the outreach letter outlines the 
steps of the review process and states that borrowers will receive a 
letter with the findings of the review. The information in the 
outreach letter is similar to what is typically included in a class 
action lawsuit notification. Regulatory staff and servicers informed 
us that they generally modeled the communication materials on class 
action lawsuit notifications.[Footnote 30] For example, sample 
communication materials for class action lawsuits designed by the 
Federal Judicial Center (FJC) include specific information about the 
nature and terms of a class action, including what the lawsuit is 
about, who is eligible, and participants' legal rights and options. 
[Footnote 31] 

In addition to information about the nature and terms of the review, 
best practices and consumer groups also suggest including specific 
information about remediation in communication materials to help 
motivate eligible participants to respond. For example, outreach 
models for class action lawsuits and industry examples include 
specific information about the amount or type of remediation 
participants can expect to receive. While these models contain 
features that may not be applicable to each aspect of the foreclosure 
review, they do provide insights into the types of information that 
might incentivize individuals to participate and therefore improve 
response rates. 

* Federal Judicial Center--Sample class action communication 
materials, including notices and flyers, provide specific financial 
remediation information, such as stating a minimum, maximum, and 
average amount of compensation, by category of participant, that a 
class member may receive from a settlement (figure 4). Another example 
provides the amount of compensation a class member may receive 
depending on the number of claim forms received. To develop these 
models, the FJC conducted "plain language" testing with nonlawyers, 
focus groups of ordinary citizens from diverse backgrounds, and survey 
testing for reading comprehension. According to these tests, 
participants' motivation to read and comprehend class action notices 
can significantly improve as a result of changing the language, 
organizational structure, format, and presentation of the notice. 

* National Association of Consumer Advocates--Foreclosure class action 
guidelines this group developed recommend, among other things, that 
participants should be informed of the total amount of relief to be 
granted, stated in dollars, and the nature and form of the individual 
relief each class member could obtain.[Footnote 32] These guidelines 
also note that participants should be informed of the full range of 
recoveries that they could obtain, either at trial or through the 
settlement. 

* National Mortgage Settlement--A settlement between 49 state 
attorneys general, the federal government, and the five leading 
mortgage servicers for improper foreclosure practices will result in 
approximately $25 billion in monetary sanctions and relief. Summary 
documentation provided on the National Mortgage Settlement website 
specifically states the total amount of the settlement and the 
approximate amount eligible borrowers can expect to receive.[Footnote 
33] For example, of the approximately $25 billion total, this 
documentation states that about $1.5 billion of the settlement funds 
will be allocated to compensation for borrowers who were not properly 
offered loss mitigation or who were otherwise improperly foreclosed 
on. It also provides the specific amount that those borrowers will be 
eligible to receive--a uniform payment of approximately $2,000 per 
borrower, depending on the level of response. In addition, the summary 
documentation states that servicers are required to provide specific 
amounts of assistance to servicemembers whose foreclosure violated 
SCRA. 

* Groups Experienced with Counseling, Representing, or Educating 
Distressed Borrowers--Consumer and community groups, including housing 
counselors, have advocated for including specific information about 
remediation that can help motivate participants to respond. 
Representatives of consumer groups we interviewed said that providing 
this information to borrowers and their advocates would allow them to 
make informed choices about submitting a request for review. They 
noted that even identifying the types of remediation available by 
category, such as moving expenses or costs due to delay, could be 
helpful. Consumer groups also informed us that such motivation is 
important because borrowers may be reluctant to submit their request-
for-review form due to mistrust in government and the fatigue of 
repeated attempts to resolve a mortgage-related issue with a servicer. 
They said that borrowers who already have been through a taxing loan 
modification process and have little confidence in the system may be 
reluctant to go through this process again without a clear outcome. In 
a previous report, we discuss borrowers' frustration, as reported by 
housing counselors, with delays in loss mitigation processes and 
borrower fatigue as a result of lost documentation, long trial 
modification periods, wrongful denials, difficulty contacting their 
servicer, and questions about the loan modification program or 
application.[Footnote 34] 

Figure 4: Remediation Information in Initial Foreclosure Review and 
Sample Class Action Lawsuit Materials: 

[Refer to PDF for image: illustration] 

Remediation details from foreclosure review print ad and letter: 

The Independent Foreclosure Review - will determine whether individual 
borrowers suffered financial injury and should receive compensation or 
other remedy because of errors or other problems during their home 
foreclosure process. 

You will receive a letter with findings of the review and information 
about possible compensation or other remedy. 

Remediation details from class action lawsuit example: 

Disease: Mesothelioma; 
Minimum: $10,000; 
Maximum: $100,000; 
Average: $20,000-$30,000. 

Disease: Lung Cancer; 
Minimum: $5,000; 
Maximum: $43,000; 
Average: $9,000-$15,000. 

Disease: Other Cancer; 
Minimum: $2,500; 
Maximum: $16,000; 
Average: $54,000-$6,000. 

Disease: Non-Malignant; 
Minimum: $1,250; 
Maximum: $15,000; 
Average: $3,000-54,000. 

Settlement Amount: $6,990,000: 
for investors (17 1/2 cents per share if claims are submitted for each 
share). 

Source: Foreclosure review materials approved y the OCC and the 
Federal Reserve. Class action materials created by the Federal 
Judicial Center. 

[End of figure] 

Regulatory staff noted that settlements in class action lawsuits are 
different from the foreclosure review, and therefore may not be a fair 
comparison. For example, they noted that settlements typically involve 
a predetermined total amount of remediation that is to be divided up, 
often proportionally, and then paid to the participating class 
members, all of whom are assumed to have suffered the injury common to 
the class. On the contrary, as part of the foreclosure review, 
servicers are not required to provide a predetermined total amount of 
remediation to financially injured borrowers identified in the 
foreclosure review. Rather, Federal Reserve officials clarified that 
the servicers are required to pay whatever total amount is appropriate 
to remediate the financial injury. In addition, OCC staff noted that, 
unlike a class action lawsuit settlement where the class of injured 
borrowers is identified and the range of remediation is known at the 
outset, the 4.3 million borrowers includes borrowers who may or may 
not have suffered financial injury within the scope of the regulators' 
consent orders. Further, regulatory staff noted that the National 
Mortgage Settlement, much like the class action settlements referenced 
above, involves a predetermined total amount of monetary sanctions and 
consumer relief, unlike the remediation that servicers must provide 
financially injured borrowers identified during the foreclosure 
review.[Footnote 35] Federal Reserve officials stated that although 
the regulators have not yet made detailed information about the 
amounts and types of remediation that may be provided to financially 
injured borrowers publicly available, the August 29, 2011, guidance 
from the regulators to the third-party consultants identifying types 
of injuries that may warrant remediation have been made publicly 
available, including in the testimony of an OCC official.[Footnote 36] 
Further, OCC staff noted that the request-for-review form, independent 
foreclosure review website, and agency websites include information 
that describes the types of financial injury that would be covered. At 
the time of our review, the regulators had not yet announced guidance 
regarding the amount of financial remediation that would be provided. 
However, OCC and Federal Reserve officials told us that public release 
of a financial remediation framework that contains detailed 
information regarding dollar amounts that may be associated with 
particular injury types was forthcoming.[Footnote 37] 

Although the foreclosure review communication materials describe the 
types of financial injury and note that remediation may be awarded, 
they do not identify remediation by type of financial injury or 
provide a range of financial compensation that may be available to 
borrowers. For example, print advertising materials, the outreach 
letter, and request-for-review form, as well as a second mailing that 
was sent in June 2012 to eligible borrowers, only notifies them that 
they could receive possible compensation or other remedy if 
foreclosure errors caused financial injury. The foreclosure review 
website and accompanying frequently asked questions provides similar 
information and note that if the review does find financial injury, 
compensation or other remedy that the borrower may receive will be 
determined by their specific situation. Similarly, most regulator 
testimonies and public statements do not identify a range of financial 
remediation that may be available for borrowers. For example, a 
Federal Reserve official testified that where financial injury is 
found, the servicers must compensate the injured borrowers pursuant to 
a remediation plan that is acceptable to the Federal Reserve.[Footnote 
38] In addition, the Federal Reserve's video discussing the 
foreclosure review, accessible via the Internet, states that the 
"borrower's file will be reviewed by an individual consultant who will 
determine if you were financially harmed by your mortgage servicer." 
[Footnote 39] An OCC official testified that there are no caps or 
limits to the amount of compensation that will be paid out or 
remediation that will be implemented by the servicers.[Footnote 40] 
This testimony also mentions, as discussed earlier, that financial 
remediation guidance is being considered that will clarify 
expectations as to the amount and type of compensation recommended for 
certain categories of injury to help ensure consistent recommendations 
across the servicers for borrowers who suffered similar types of 
injury. Regulator-sponsored webinars for community groups stated 
similarly that the financial remediation framework will address 
borrowers' questions about the kinds and amounts of remediation that 
will be offered for different types of injuries. 

Specific information about potential remediation could be difficult to 
present in a simple manner given the 22 potential types of injury 
agencies identified and various unique borrower circumstances that 
could affect the type and amount of remediation borrowers will 
receive.[Footnote 41] Federal Reserve staff explained that providing 
borrowers specific information about remediation also is difficult 
because, as noted earlier, regulators have not set a predetermined 
total amount of remediation, and the foreclosure review is not yet 
complete so consultants have not yet identified all financially 
injured borrowers. Regulators are developing financial remediation 
guidance that is intended to serve as a baseline standard yet provide 
flexibility to the consultants to address the borrower's direct 
financial injury. As of May 2012, regulatory staff said that they were 
still in the process of preparing such guidance, which the regulators 
intend to publish when it is finalized.[Footnote 42] As a result, 
representatives of some servicers we interviewed told us they could 
not include remediation information in the communication materials. 
Federal Reserve staff and one servicer also expressed concern that 
providing this information might confuse borrowers or raise false 
expectations for what compensation they might receive. However, a 
recent OCC speech provides some specific information about the 
potential range of remediation categories, which consumer groups said 
could help increase borrowers' motivation to submit a request for 
review.[Footnote 43] For example, the remarks state that remediation 
for financial injuries may include, but is not limited to, lump-sum 
payments, rescinded foreclosures, reimbursements of lost equity, 
repayment of out-of-pocket expenses resulting from the error plus 
interest, correction of erroneous amounts owed in applicable records, 
and correcting credit reports. Similar information on a potential 
range of remediation categories is not discussed in any of the 
regulators' other communication materials that we reviewed. Given the 
potential difficulties on reaching and motivating this population, 
without financial remediation information available, borrowers might 
not be motivated to respond. 

Outreach Was Based on Limited Analysis of Eligible Borrower Subgroups: 

The initial coordinated servicer outreach plan approved by regulators 
provided for a uniform outreach process with additional targeted 
outreach to African-American and Spanish-speaking borrowers. In 
developing the outreach activities, servicers did not analyze the 
target audience for characteristics--such as those associated with low 
financial literacy--that may have limited some borrowers' ability to 
respond to outreach activities. To address concerns that borrowers may 
not respond to outreach from servicers, a third-party entity serves as 
the contact point for borrower mailing and questions. While OCC and 
the Federal Reserve have acknowledged community groups as effective 
messengers to reach the target audience and have encouraged servicers 
to coordinate with these groups, servicers have leveraged outreach 
through community groups to varying degrees. Regulators regularly 
monitored the status of the outreach activities, but did not compare 
respondents to nonrespondents to determine whether certain groups of 
borrowers were underrepresented in the response to the initial 
outreach activities. Without this analysis, the extent to which the 
outreach process has effectively complemented the file-review process 
to identify borrowers who may have suffered financial injury is 
unclear. 

Initial Outreach Was Largely Uniform with Limited Targeted Outreach: 

Regulators approved a uniform process to reach eligible borrowers, 
with additional targeted outreach limited to African-American and 
Spanish-speaking borrowers. According to Federal Reserve staff, the 14 
servicers covered by the consent order service more than two-thirds of 
U.S. mortgages. According to the outreach plan developed by servicers 
and approved by OCC and the Federal Reserve, the target audience of 
4.3 million eligible borrowers--that is, borrowers whose loans on 
their primary residences had been in some stage of foreclosure in 2009 
or 2010--is concentrated in those states that experienced higher 
foreclosure rates, but broadly represents the U.S. population as a 
whole covering all ages and income levels. Therefore, servicers 
determined that the best way to reach their target audience of all 
eligible borrowers was to use direct mail--the same outreach letter 
and request-for-review form were mailed to all eligible borrowers--and 
to place advertisements in four national publications. [Footnote 44] 
According to regulatory staff, after conducting some analysis, the 
servicers selected these publications for their large circulation both 
nationally and in states with heavy foreclosure volume, as well as for 
their broad appeal among both men and women and across different ages 
and income levels. In addition to print advertisements, servicers 
provided online paid search advertising to assist borrowers using the 
Internet to find the independent foreclosure review website and OCC 
ran English-language public-service radio and newspaper advertisements 
in small radio stations and newspapers in 38 states. According to 
regulator guidance on the outreach process, the process was intended 
to be robust and to ensure that all borrowers had a fair opportunity 
to file a request-for-review form. 

As part of the initial implementation of coordinated outreach 
activities, regulators reviewed the outreach plan with 19 consumer 
groups familiar with the target audience of all eligible borrowers and 
in part based on their feedback, incorporated outreach activities to 
reach certain populations. These additional activities generally 
occurred concurrently--that is, in January and February 2012--with the 
national advertisements and outreach. For example, to target the 
Hispanic population, Spanish-language print advertisements were placed 
in 26 publications in communities servicers had identified as having 
large Hispanic populations that were in states recognized nationally 
as having high concentrations of loans in default and 
foreclosure.[Footnote 45] OCC also placed Spanish-language public-
service advertisements in print publications and over the radio in at 
least six states. In addition, to reach borrowers with limited English 
proficiency the toll-free customer assistance phone number included 
translation services in over 240 languages with some in-language 
notification about this service included in outreach materials. 
[Footnote 46] Finally, OCC and the Federal Reserve directed servicers 
to increase outreach to African-American borrowers and servicers 
purchased advertisements in one additional national print publication 
that primarily targets the African-American community.[Footnote 47] 

Our prior work has found that effectively reaching targeted audiences 
through outreach activities requires analysis of the target audience, 
including dividing the audience into smaller groups of people who have 
relevant needs, preferences, and characteristics.[Footnote 48] For 
example, one way to divide the foreclosure review target audience into 
smaller groups would be to analyze the geographic location of the 
target audience by Metropolitan Statistical Area (MSA) or zip code, 
rather than by state. These divisions could enable more refined 
outreach--such as concentrated advertising in local publications and 
on local radio stations, or holding community outreach events in 
addition to direct mail and national advertising--in those areas with 
high concentrations of the target audience. As illustrated in figure 
5, our prior work analyzing foreclosure trends among nonprime loans 
found that as of June 2009--near the beginning of the review period--
concentrations of loans in the foreclosure process varied by 
congressional district, even in those states with high default and 
foreclosure rates such as California and Florida, indicating that 
targeted outreach in these areas could be more likely to reach 
eligible borrowers.[Footnote 49] Other outreach campaigns have used 
this type of analysis to target their outreach activities, including a 
congressionally appropriated national loan modification scam alert 
campaign conducted by NeighborWorks America, a government-chartered, 
nonprofit corporation.[Footnote 50] This organization conducted a zip-
code-level analysis of minority homeowners and mortgage performance to 
identify areas within hardest hit states for targeted outreach--for 
example, areas of California south of San Francisco. 

Figure 5: Estimated Rates of Active Nonprime Loans in the Foreclosure 
Process by Congressional District, as of June 30, 2009: 

[Refer to PDF for image: illustrated maps of California and Florida] 

Maps depict areas with the following foreclosure rates: 
Less than 10%; 
10 to less than 15%; 
15 to less than 20%; 
20 to less than 25%; 
Greater than or equal to 25%. 

Source: GAO analysis of Loan Performance data; MapInfo (maps). 

Notes: Nonprime loans include subprime and Alt-A loans. Loans were 
originated between 2000 and 2007. For additional discussion of the 
methodology for this analysis see appendix I and GAO-10-146R. 

[End of figure] 

Similarly, the target audience could be analyzed and divided according 
to other characteristics that could also affect the likelihood of 
response. As previously discussed, we have reported that borrowers 
with characteristics generally associated with low financial literacy--
such as low income, low education levels, or limited English 
proficiency--have increased difficulty making informed financial 
decisions and taking effective actions.[Footnote 51] Research has 
found that borrowers with some of these characteristics--such as low-
income--were more likely to be in default and foreclosure during the 
recent crisis. For example, in a speech, a Federal Reserve official 
reported that as of the first quarter of 2011--just after the eligible 
period for this review--13 percent of mortgages originated to 
borrowers in low-and moderate-income neighborhoods were 90 days or 
more overdue, compared with 6 percent of mortgages originated to 
borrowers in high-income neighborhoods.[Footnote 52] Servicers 
collected borrower-level data at loan origination that would assist in 
analyzing these characteristics. Where borrower-specific data on other 
characteristics may not be available--such as data on English-language 
proficiency or the primary language spoken in the home--analysis of 
Census data could provide additional information. Ensuring effective 
outreach to meet the needs of groups of borrowers with different 
characteristics necessitates first identifying the relevant groups and 
then planning appropriate outreach activities to effectively reach 
them, such as by working with local community groups or partnering 
with local elected officials familiar with these borrowers. Although 
the regulators and servicers enhanced outreach with Spanish-language 
materials and included in-language notification about free translation 
services available at the toll-free customer assistance phone number 
in outreach materials, no additional coordinated outreach was 
conducted in other languages, such as some Asian languages. However, 
based on our analysis of the Census Bureau's 2008-2010 American 
Community Survey, we found that U.S. residents with limited English 
proficiency in languages other than Spanish may be concentrated in 
areas with high rates of foreclosure. For example, approximately 40 
percent of adult speakers of some Asian languages (Chinese, Korean, 
and Vietnamese) who reported limited English proficiency were in 
California, a state that experienced high rates of default and 
foreclosure in 2009 and 2010.[Footnote 53] Similar to the targeting 
done by servicers to reach Spanish-language borrowers, conducting 
targeted in-language outreach in areas with high rates of default and 
foreclosure and concentrated populations of limited English 
proficiency speakers of a specific language could help reach 
additional borrowers. In addition, providing targeted, outreach to 
groups of borrowers with different characteristics could strengthen 
efforts to reach groups that are less likely to respond to outreach 
efforts. 

In approving the initial coordinated outreach plan, regulators 
considered the extent to which the plan provided appropriate outreach 
to the target audience but conducted limited analysis to understand 
that audience. According to OCC and Federal Reserve staff, to evaluate 
and approve the coordinated servicer outreach plan, regulators 
considered factors such as the extent to which the plan (1) was 
consistent with industry practices, particularly related to class 
action lawsuits; (2) was developed based on consultation with 
marketing experts; (3) was designed to provide significant coverage in 
areas with high concentrations of foreclosure; (4) was appropriate to 
reach the demographics of the target audience; and (5) promoted 
national awareness. Federal Reserve staff noted that the Federal 
Reserve Board had limited experience with outreach plans and therefore 
consulted with their staff with the most relevant experience when 
reviewing the plans. OCC and Federal Reserve staff said they 
considered servicers to be familiar with the target audience based on 
their experience servicing loans and recognized that servicer 
marketing staff helped develop the outreach plan. In addition, 
servicers said they were knowledgeable about the general geographic 
concentration of these borrowers based on their previous analysis of 
default and foreclosure trends. Finally, servicers consulted with 
several marketing firms to help identify the most appropriate methods 
to reach their target audience--such as, direct mail--and to assist in 
purchasing advertisements. However, because the target audience was 
considered to broadly represent the U.S. population as a whole, 
analysis of the target audience was limited and did not include 
analysis of data on loan and borrower characteristics, such as income-
level or age to identify subgroups of the target audience. Internal 
control standards require agencies to identify risks that could impede 
the success of their efforts and to take steps to mitigate those 
risks.[Footnote 54] Without an analysis of subgroups of the target 
audience, including geographic location and certain borrower economic 
and demographic characteristics, the regulators may not have had the 
necessary information to help ensure servicers' outreach efforts were 
designed to maximize their ability to target certain groups and 
support a fair opportunity to request a foreclosure review. 

Servicers Used Credible Messengers in Their Coordinated Outreach to 
Varying Degrees: 

Representatives from servicers we interviewed told us that identifying 
a credible messenger to provide information to the borrower through 
the outreach process was a challenge. Although servicers were 
responsible for the outreach activities and were often familiar to the 
borrower from servicing the loan, the servicers were not necessarily 
the best choice to deliver information about the foreclosure review, 
because some borrowers had challenging experiences working with them 
during the foreclosure process. As a result, the servicers used a 
third-party administrator to send direct mail and they directed 
borrowers' requests for additional information to a non-specific 
entity, entitled Independent Foreclosure Review. Neither the 
regulators nor the servicers conducted focus groups or consultations 
with the target audience to identify credible messengers. For example, 
the government-chartered, nonprofit corporation that led the national 
loan modification scam alert campaign discussed earlier conducted both 
one-on-one in-depth interviews and focus groups with delinquent 
borrowers to identify sources trusted by the target audience, as well 
as, to identify optimum media outlets and communication channels to 
reach that audience. We have previously reported that effective 
planning of outreach activities, including activities designed to 
elicit a one-time action, require analysis of credible messengers to 
reach the target audience.[Footnote 55] Consumer groups raised 
concerns that if servicers did not use familiar and trusted messengers 
that borrowers would find credible, borrowers would discard the direct 
mailing or ignore the advertisements because they did not understand 
who provided the information or believed they were fraudulent. As a 
result, the outreach process may have missed opportunities to reach 
some of the target audience and contributed to low response rates. 
Consumer groups provided feedback to the regulators suggesting that 
they include the OCC and Federal Reserve seals on the initial print 
advertisement, but regulators did not incorporate this suggestion. 
According to Federal Reserve staff, regulators did not include 
official seals on the outreach materials due to legal restrictions and 
potential use of official seals in connection with fraudulent schemes. 
However, in response to subsequent concerns raised about the 
credibility of the outreach materials, specific references to OCC and 
the Federal Reserve, including the regulators' Internet addresses, 
were added to the independent foreclosure review website, and a 
reference to Federal Banking Regulators was added to the outside of 
the second mailing. 

Although OCC and the Federal Reserve have acknowledged community 
groups as effective messengers to reach the target audience and have 
encouraged servicers to coordinate with these groups, regulator 
guidance to servicers on working with community groups did not specify 
servicer roles and responsibilities for this outreach. OCC has 
recognized that using community groups as part of the outreach process 
enhances its ability to reach some of the target audience, including 
low-and moderate-income borrowers, minority borrowers, and individuals 
with limited English proficiency. Similarly, a Federal Reserve 
official stated that working with community groups as part of the 
outreach effort increases program awareness and promotes borrower 
participation. The Federal Reserve also has encouraged servicers to 
work with community groups to conduct additional foreclosure review 
outreach activities by providing them credit against their penalties 
for any amount of funding provided to nonprofit housing counseling 
organizations. Because of the experience of these groups, particularly 
housing counselors, in working directly with distressed borrowers, 
regulators conducted outreach sessions for community groups and have 
encouraged these groups to conduct their own outreach activities. 
These sessions included two webinars to provide these groups with 
information on the process and to train them to assist borrowers to 
complete the request-for-review form.[Footnote 56] According to 
community group representatives, some groups have initiated their own 
outreach about the foreclosure review process, but these efforts have 
been limited by the availability of funding.[Footnote 57] In addition, 
in their guidance to servicers on the outreach process, regulators 
instructed servicers to conduct outreach to community groups to enable 
them to educate their constituents about the borrower request-for-
review process. This guidance did not describe the specific roles and 
responsibilities of the servicers in conducting this type of outreach 
or in supporting the efforts of community groups to reach their 
constituents. According to regulatory staff, providing specific 
guidance to servicers to directly fund community groups to conduct 
outreach was different than other required activities, such as funding 
direct mail and advertising, and thus was not considered appropriate 
as a requirement for servicers. 

Servicers have leveraged outreach through community groups to varying 
degrees. As part of the coordinated outreach activities, the 14 
servicers contracted with an association of financial services 
companies, including mortgage lenders and servicers, to hold two 
national conference calls with community groups to share information 
about the foreclosure review process. In addition, 3 of the 14 
servicers have provided funding to approximately 15 community groups 
that have in turn provided support to over 100 member organizations to 
conduct borrower outreach.[Footnote 58] These activities were designed 
to increase awareness about the foreclosure review process and to 
assist borrowers in completing the request-for-review form. According 
to representatives with one of the servicers undertaking these 
efforts, the decision to use these groups was in part motivated by a 
desire to identify and use messengers who might more effectively reach 
certain borrower groups that otherwise may not respond to the outreach 
efforts. These additional activities were conducted in English, 
Spanish, and other languages--including some Asian languages--and 
included letters and emails to former clients who were eligible for 
the program and toll-free customer assistance phone numbers to help 
borrowers complete the request-for-review form. Further, according to 
OCC staff, third-party consultants also held several meetings with 
representatives of community groups to share information about the 
foreclosure review process and facilitated a visit to an audit site to 
see reviews being conducted. 

Regulators Monitored Status of Initial Outreach but Did Not Analyze 
Characteristics of Nonrespondents: 

OCC and the Federal Reserve regularly monitored borrower response to 
outreach activities, as well as the quality of borrower services 
provided by the third-party administrator. Regulators received daily 
and weekly reports from the third-party administrator on the use of 
the toll-free customer assistance phone number and website, as well as 
data on the number of request-for-review forms received and the types 
of requests. In addition, they received data on the quality of the 
assistance provided through the customer assistance phone number and 
website. Analysis was also conducted on the effect of the national 
print campaign on calls to the customer assistance phone number, 
visits to the website, and request form submissions. Finally, OCC and 
the Federal Reserve have monitored the percentage of mail successfully 
delivered. 

Regulators did not establish measurable goals to use in assessing the 
effectiveness of the outreach process. For example, there was no 
target response rate for the number of requests for review to be 
received as a result of the outreach activities. According to an OCC 
official, the unique nature of the outreach campaign and foreclosure 
review process makes it difficult to set specific targets for the 
number of requests for review. Similarly, Federal Reserve staff 
explained that because the number of borrowers that were harmed is 
unknown, it was difficult to project how many borrowers would request 
reviews. Recognizing that the volume was unknown, servicers directed 
the third-party administrator responsible for receiving the request-
for-review forms and responding to borrower questions on the toll-free 
customer assistance number to develop contingency plans to allow the 
administrator to continue to respond if the volume of responses 
exceeded their daily or weekly projections. Initial projections that 
were used for planning purposes of the total number of requests for 
review varied, with some third-party consultants estimating response 
rates of between 10 percent and 20 percent in the engagement letters 
between the servicers and their consultants. In contrast, another 
third-party consultant and some servicers anticipated response rates 
of around 5 percent. In the absence of measurable goals to assess the 
performance of outreach activities, determining if the actions taken 
are sufficient or if additional steps are needed is difficult. 

In addition, monitoring has not included analyzing or requesting 
servicers or third-party consultants to analyze trends among 
respondents and nonrespondents to determine whether all groups of 
borrowers are represented in the review process and that no particular 
group is underrepresented. Beginning in late April 2012, servicers 
conducted additional outreach activities to reach borrowers who had 
not yet responded and better ensure that borrowers were aware of the 
extension of the request-for-review deadline. These outreach 
activities were modeled on the original activities and included a 
second mailing to eligible borrowers whose initial outreach letter was 
delivered successfully but had not yet responded and print 
advertisements in the same national and Spanish-language publications. 
[Footnote 59] Regulator staff said that feedback from consumer groups 
was used to enhance the content of the mailing and advertisements and 
information in additional languages was included in the materials. 
According to OCC and Federal Reserve staff, in planning these 
additional outreach activities, no analysis was conducted of the 
borrowers who had not responded to the initial outreach efforts as 
compared to those who had. For example, analysis by servicer, 
geographic location, or certain social or demographic characteristics 
collected at loan origination--such as those associated with low 
financial literacy--could have been used to determine if additional 
outreach activities were needed to better reach these groups. 
According to a representative from one servicer, the servicer had done 
some analysis of respondents compared to nonrespondents early in the 
process in January 2012, but had not updated this analysis or used the 
results to direct their outreach efforts. Our prior work has found 
that evaluating performance, particularly when there is a change in 
activities, helps ensure that processes continue to improve and 
evolve.[Footnote 60] In the absence of this type of analysis, 
regulators may not have had the information needed to determine 
whether additional outreach efforts were appropriate to help ensure 
that all groups were effectively reached by the national campaign and 
had a fair opportunity to request a review. Additional targeted 
outreach activities, such as further outreach through community 
groups, distribution of flyers, phone calls to eligible borrowers, or 
community meetings, may be warranted. In addition, whether the 
campaign has effectively complemented the look-back file reviews to 
help ensure that the two processes combined maximize identification of 
borrowers who have suffered financial injury is unclear. The look-back 
file review generally relies on sampling--and in some cases 100 
percent review--to provide a high degree of certainty that borrowers 
who have been financially injured are identified and obtain 
remediation.[Footnote 61] However, if the outreach process has been 
less successful in reaching certain subgroups of eligible borrowers 
that the look-back review has not taken into consideration, changes to 
the sampling to ensure that all borrowers have an equal opportunity 
for review may be warranted. 

Conclusions: 

While the regulators have taken a number of steps to improve the 
servicers' outreach associated with the independent foreclosure review 
over time by improving the format of communication materials, 
incorporating feedback from consumer and community groups, and 
increasing outreach to particular populations, among other things, 
opportunities for further improvement remain. An effective outreach 
process is designed to reach all segments of its audience, regardless 
of such factors as reading level and language spoken, among others. 
Neither the servicers nor the regulators conducted readability testing 
or focus groups with the target audience of eligible borrowers, and 
regulators initially did not solicit input from consumer or community 
groups familiar with these borrowers. Readability tests of the 
outreach letter, request-for-review form, and website indicate that a 
high school or even a college reading level may be required to 
understand them; however, the use of some complex terms may be 
unavoidable. In addition, although some information is now available 
on the website in Spanish, the initial communication materials were 
not available in languages other than English. Our previous reports 
and federal plain language guidelines indicate that whether agencies 
are preparing documents or requiring private sector companies to 
prepare them, testing communication materials is a sound practice to 
help ensure that the audience can understand them and use them to take 
action. Moreover, complexity in the communication materials may 
prevent people from becoming sufficiently aware of the foreclosure 
review, and the prospect of confusing or complex forms may discourage 
people from participating. In addition, borrowers with low financial 
literacy, including those with limited English proficiency, may have 
difficulty accessing and understanding the materials, potentially 
affecting the likelihood of them requesting a review. Because 
communication materials were not tested and were written at a high 
reading level, some eligible borrowers might have had difficulty 
understanding them. To the extent the accessibility of the 
communication materials affects certain groups' likelihood of 
responding, they may not have had a fair opportunity to request a 
foreclosure review as the regulators intended the outreach process to 
provide. With the second wave of advertising and the additional 
mailing directing eligible borrowers to the independent foreclosure 
review website, ensuring that the online request-for-review form is 
understandable is especially important. 

In addition, although the communication materials provide information 
about the purpose, scope, and process for the foreclosure review, and 
types of financial injuries covered, as well as disclosing that 
borrowers could be eligible for compensation, they do not include 
specific information about the potential types or amounts of 
remediation borrowers may receive. Specifically identifying that the 
types of remediation may consist of such items as lump-sum payments, 
rescinding foreclosures, repayment of out-of-pocket expenses, or 
correcting credit reports could help motivate borrowers to respond. 
Industry best practices and examples for notifying borrowers about 
class action lawsuits, which regulatory staff and servicer 
representatives used as a model in developing the materials, include 
specific information about the types and amounts of remediation for 
which participants could be eligible. Without specific information 
about remediation in communication materials, some borrowers may not 
be motivated to submit a request-for-review form. 

Finally, the planning, and in particular, evaluation of the borrower 
outreach process were based on limited analysis of eligible borrowers. 
Although servicers conducted some targeted outreach to African-
American and Spanish-speaking borrower, in part due to feedback from 
consumer groups, the outreach process was largely uniform. Our prior 
work has found that analyzing the target audience by various 
characteristics and identifying messengers the audience will consider 
credible helps ensure that the outreach is effective. However, in 
approving the outreach plan regulators did not require servicers to 
conduct such analysis and although the regulators have encouraged 
servicers to work with community groups that have experience as 
trusted advisers to distressed borrowers, servicers have done so to 
varying degrees. We have also found that evaluating the effectiveness 
of past activities is important before expanding them, such as by 
conducting additional advertising or mailings to eligible borrowers. 
Regulators have monitored the status of outreach activities, but have 
not analyzed the differences in characteristics between respondents 
and nonrespondents in planning the additional outreach efforts. This 
analysis could help identify whether any groups of borrowers, 
particularly those borrowers with characteristics that could make them 
less likely to respond to the request for review, are 
underrepresented. The results of such analysis also could provide 
regulators, third-party consultants, and servicers with the 
information to target additional outreach to any underrepresented 
groups or to make changes to the file-review sampling process to 
ensure that all borrowers are fairly represented. We acknowledge that 
because the borrower outreach and look-back review are complementary, 
the outcomes of the foreclosure review cannot fully be evaluated until 
the look-back review is completed. However, until analysis of the 
characteristics of respondents compared to nonrespondents is 
conducted, the potential that certain subgroups of eligible borrowers 
do not have a fair opportunity to request a foreclosure review remains. 

Recommendations for Executive Action: 

OCC and the Federal Reserve have taken steps to improve the outreach 
from the initial roll-out. To further increase the possibility that 
all borrowers have a fair opportunity to request a foreclosure review, 
the Comptroller of the Currency and the Chairman of the Board of 
Governors of the Federal Reserve System should take the following 
actions: 

* Enhance the readability of the request-for-review form on the 
independent foreclosure review website so that it is more 
understandable for borrowers, such as by including a plain language 
guide to the questions. 

* Require that servicers include a range of potential remediation 
amounts or categories in communication materials and other outreach, 
such as direct mailings to borrowers, public service announcements, 
the independent foreclosure review website, regulators' websites, and 
officials' testimonies and speeches. 

* Require servicers to identify trends in borrowers who have and have 
not responded by factors such as MSA, zip code, servicer, and borrower 
characteristics and report to the regulators on weaknesses found. If 
warranted, regulators should require that servicers, in consultation 
with their third-party consultants, conduct more targeted outreach to 
better reach underrepresented groups, such as considering more 
credible messengers to reach these groups. If such action cannot be 
taken prior to the deadline for requests for review, regulators should 
consider expanding the look-back review to better ensure coverage for 
underrepresented groups. 

Agency Comments and Our Evaluation: 

We requested comments on a draft of this report from OCC and the 
Federal Reserve. We received written comments from OCC and the Federal 
Reserve that are presented in appendixes II and III, respectively. 
Both agencies emphasized that the outreach process that we focused on 
in this report is one part of a larger effort to identify financially 
harmed borrowers for remediation. The Comptroller of the Currency 
noted in his written comments that OCC shares the goals reflected in 
the report and is in the process of addressing each of the 
recommendations. The Comptroller's letter also provides a more 
detailed list of initiatives OCC has undertaken related to the 
borrower outreach process, which is consistent with the actions we 
summarized in the draft report. The Director of the Division of 
Consumer and Community Affairs of the Board of Governors of the 
Federal Reserve System also noted that the Federal Reserve has begun 
implementing each of the recommendations. First, the letter states 
that the agencies plan to post a plain language guide to completing 
the request-for-review form to the agencies' and independent 
foreclosure review websites. Second, the letter states that once a 
framework describing the range of potential remediation is finalized 
the regulators will issue press releases, post the framework on the 
regulators' and independent foreclosure review websites and in 
frequently asked questions, and hold briefings with consumer and 
community groups. Third, the letter states that the Federal Reserve is 
conducting analysis to identify any gaps in respondents by geography 
and certain borrower characteristics, which will be publicly released 
to promote targeted outreach. 

The Director's letter noted the limitations of readability formulas in 
assessing how well the foreclosure review communication materials 
could be understood. We had also acknowledged these limitations in the 
draft report and noted that they are just one indicator of the 
readability of the materials. However, the results of these formulas 
when combined with other evidence, such as feedback from consumer and 
community groups who have had direct interaction with distressed 
borrowers, suggested that more could be done to clarify the 
communication materials. The plain language guide for borrowers 
completing the request-for-review form that the Federal Reserve is in 
the process of completing is an important step in addressing 
readability. 

The Director's letter also stated that the comparison between the 
foreclosure review communication materials and class action lawsuit 
settlement materials was "imprecise and not appropriate." In the draft 
report, we acknowledged the differences between these two activities 
and the difficulty in providing specific information on remediation in 
the case of the foreclosure review. Because the borrower outreach 
process and materials were generally modeled after class action 
lawsuit activities, we considered it applicable criteria and presented 
the comparison as an illustrative example of the type of information 
that has been found to be helpful in motivating participation. The 
steps the regulators are taking to publicly release information on the 
types and amounts of remediation that financially harmed borrowers 
might receive as a result of the foreclosure review is another 
important step toward promoting participation. 

We received technical comments from each regulator, which we 
incorporated where appropriate. In OCC's letter, the Comptroller of 
the Currency stated that the agency provided us with specific report 
line edits that reflected both substantive comments as well as 
technical or editorial suggestions. The substantive comments 
emphasized that the outreach component of the foreclosure review was 
an additional step not typically taken in enforcement actions and 
provided more information on the actions the agencies and servicers 
took to reach out to potentially harmed borrowers. In addition, OCC 
staff raised concerns about the context for our criteria on plain 
language in the technical comments. The draft report acknowledged the 
unprecedented nature of the review, and we made changes to the draft 
report to reflect the other comments, as appropriate. 

We are sending copies of this report to interested congressional 
committees, the Board of Governors of the Federal Reserve System, 
Office of the Comptroller of the Currency, and other interested 
parties. The report is also available at no charge on the GAO website 
at [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-8678 or evansl@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. Key contributors to this report are 
listed in appendix IV. 

Sincerely yours, 

Signed by: 

Lawrance L. Evans, Jr. 
Acting Director, Financial Markets and Community Investment: 

List of Requesters: 

The Honorable Robert Menendez: 
Chairman: 
Subcommittee on Housing, Transportation, and Community Development: 
Committee on Banking, Housing, and Urban Affairs: 
United States Senate: 

The Honorable Luis V. Gutierrez: 
Ranking Member: 
Subcommittee on Insurance, Housing, and Community Opportunity: 
Committee on Financial Services: 
House of Representatives: 

The Honorable Maxine Waters: 
Ranking Member: 
Subcommittee on Capital Markets and Government-Sponsored Enterprises: 
Committee on Financial Services: 
House of Representatives: 

The Honorable Brad Miller: 
House of Representatives: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

This report focuses on the design and implementation of the borrower 
outreach process to determine how well information about the 
foreclosure review is communicated to eligible borrowers with 
different characteristics. Specifically, this report addresses (1) the 
extent to which the development of the approach and content of the 
communication materials and website reflected best practices; and (2) 
the extent to which the planning and evaluation of the outreach and 
advertising approach considered the characteristics of the target 
audience. 

Development and Content of Communication Materials: 

To determine the extent to which the development of the approach and 
content of the communication materials and foreclosure review website 
reflected best practices, we (1) reviewed regulator documents, 
engagement letters, and outreach materials; (2) conducted readability 
testing of the online outreach letter and request-for-review form; (3) 
analyzed data on the extent of limited English proficiency in the 
United States and the effects of limited English proficiency on 
financial literacy; and (4) assessed the extent to which the 
remediation content in the communication materials reflects best 
practices. To do this, we reviewed key documents, including regulator 
guidance on outreach activities, the outreach plan, engagement letters 
between servicers and third-party consultants, and outreach materials, 
such as the outreach letter, request-for-review form, foreclosure 
review website, online request-for-review form, frequently asked 
question guide accompanying the foreclosure review website, print 
advertising materials, the reminder postcard, and community group 
webinar materials. We compared these documents with best practices we 
had previously established and guidelines established by federal 
agencies related to testing materials with the target audience prior 
to use and ensuring that materials are clearly written and take into 
account the audiences' current level of knowledge. We considered these 
outreach practices applicable to the outreach campaign for the 
foreclosure review as they were developed to elicit a one-time action-
-similar to filing a request-for-review form--from the target 
audience. In our prior work analyzing the planning, implementation, 
and evaluation of outreach campaigns, we developed standards by 
conducting an expert panel of 14 senior management-level experts in 
strategic communications who identified key planning, implementation, 
and measurement components for consumer education and outreach. 
[Footnote 62] The experts were selected for their experience 
overseeing a strategic communications or social marketing campaign or 
other relevant experience and represented private, public, and 
academic institutions. In addition, we considered our prior work 
analyzing suggested improvements to the content and format of 
communication materials. Specifically, for our prior work on credit 
card disclosures, we conducted interviews, reviewed documents, and 
analyzed more than 280 comment letters requested by the Federal 
Reserve in 2005 from issuers, consumer groups, and others as part of 
the Federal Reserve's preparation to implement new credit card 
disclosure requirements.[Footnote 63] Further, we considered the 
Office of Management and Budget's Final Guidance on Implementing the 
Plain Writing Act of 2010 and accompanying Federal Plain Language 
Guidelines. We also considered the Securities and Exchange 
Commission's A Plain English Handbook: How to Create Clear SEC 
Disclosure Documents. Finally, to describe the reading level of the 
U.S. population, we reviewed findings from the 1992 National Adult 
Literacy Survey on adult reading comprehension levels and the 
subsequent 2003 National Assessment of Adult Literacy (renamed from 
1992). No further assessments have been conducted since 2003. 

To evaluate the readability of the English language materials on the 
website, particularly the outreach letter and request-for-review form, 
we used computer-facilitated formulas to predict the grade level 
required to understand the materials. Readability formulas measure the 
elements of writing that can be subjected to mathematical calculation, 
such as the average number of syllables in words or number of words in 
sentences in the text, but do not reflect the complexity of ideas in a 
document or how clearly the information has been conveyed. We edited 
the text to help ensure that the tests returned accurate results and 
applied the following industry-standard formulas to the documents: 
Flesch-Kincaid Formula, Gunning Frequency of Gobbledygook Readability 
Test (FOG), and McLaughlin Simplified Measure of Gobbledygook Formula 
(SMOG).[Footnote 64] Using these formulas, we measured the grade 
levels at which the website was written, both for each page of the 
website separately and for the website as a whole (see table 1). We 
did not verify the accuracy of the formulas implemented by these 
tests, but we used multiple tests to collaborate the results. Despite 
limitations, we determined that these tests were sufficiently reliable 
for our purposes. To analyze the quality of the translation and the 
readability of the Spanish-language outreach materials on the 
independent foreclosure review website--specifically, the Spanish-
language guide for the request-for-review form--a trained translator 
(1) compared the translation of the Spanish-and English-language 
materials to assess the extent to which they provided the same 
information, (2) analyzed the Spanish-language materials for 
readability, and (3) reviewed the placement and content of the in-
language Spanish statements in the English-language materials. The 
translator's conclusions were then reviewed by a native Spanish 
speaker with professional experience translating and writing official 
documents. We determined that this review was sufficiently reliable 
for our purposes. 

Table 1: Results of Whole Website Readability Analysis: 

Test: Flesch-Kincaid grade level; 
Predicted grade level required to understand text: 11. 

Test: FOG; 
Predicted grade level required to understand text: 10. 

Test: SMOG; 
Predicted grade level required to understand text: 13. 

Test: Average; 
Predicted grade level required to understand text: 11. 

Source: GAO analysis of Independent Foreclosure Review website using 
Flesch-Kincaid Formula, FOG, and SMOG readability tests. 

Note: We calculated the statistics for the website as a whole, but 
excluded text on page 3 of the website that requests basic contact 
information because it was not in sentence form. 

[End of table] 

To describe the potential pool of eligible borrowers with limited 
English proficiency, we analyzed data on the extent of limited English 
proficiency and considered the effects of limited English proficiency 
on financial literacy. To describe the U.S. population of individuals 
with limited English proficiency, we updated analysis we conducted for 
a prior report on financial literacy.[Footnote 65] We obtained and 
analyzed data from the United States Census Bureau's 2008-2010 
American Community Survey. As noted in our prior report, the Census 
Bureau does not define the term limited English proficiency. As such, 
we replicated the measures of the limited English proficient 
population we used in our prior report based on questions in the 
American Community Survey that asked "Does this person speak a 
language other than English at home?" "What is the language?" "How 
well does this person speak English?" For our purposes, we included in 
the limited English proficiency estimate individuals over the age of 
18 who self-reported that they speak English "not well" or "not at 
all." Because the American Community Survey data are a probability 
sample based on random selections, this sample is only one of a large 
number of samples that might have been selected. Since each sample 
could have provided different estimates, we express our confidence in 
the precision of our particular sample's results as a 95 percent 
confidence interval. This is the interval that would contain the 
actual population value for 95 percent of the samples that could have 
been drawn. In this report, All Public User Microdata Area-level 
percentage estimates derived from the 2008-2010 American Community 
Survey have 95 percent confidence levels of plus or minus 4.5 
percentage points or less, unless otherwise noted. We determined that 
these data were sufficiently reliable for our purposes. To describe 
the potential effects on financial literacy from limited English 
proficiency, we reviewed our prior work and relied on those findings. 
The work conducted for the prior report included (1) reviewing 
relevant literature related to financial literacy among immigrants and 
people with limited English proficiency; (2) conducting interviews 
with and gathering relevant studies and educational materials from 
federal agencies, organizations that provided financial literacy and 
education, and organizations that serve or advocate for populations 
with limited English proficiency; and (3) conducting a series of 10 
focus groups to discuss the barriers that individuals with limited 
English proficiency may face in improving financial literacy and 
conducting their financial affairs.[Footnote 66] 

To determine how well the content of the communication materials and 
foreclosure review website reflect industry best practices related to 
publication of remediation amounts, we assessed the materials against 
examples of information included in class action lawsuit 
notifications.[Footnote 67] We chose class action lawsuit examples and 
determined them to be applicable to the foreclosure review because 
that is the model regulatory staff and servicers told us they used in 
developing the communication materials. For example, we reviewed the 
communication materials against class action communication materials 
for homeowners, construction workers, and product liability suits 
developed by the FJC. The FJC developed illustrative notices of 
proposed class action certification and settlement by studying 
empirical research and commentary on the plain language drafting of 
legal documents, testing notices with nonlawyers for comprehension, 
evaluating them for readability, testing their effectiveness before 
focus groups composed of ordinary citizens from diverse backgrounds, 
and conducting a survey. We also reviewed guidelines available from 
the National Association of Consumer Advocates (NACA) on the form and 
content of notices for class action settlements. These guidelines 
address issues such as the scope of class member releases, attorneys' 
fees, and notice of settlement. NACA maintains the comprehensive 
Standards and Guidelines for Litigating and Settling Consumer Class 
Actions 176 F.R.D. 375, first published in 1998, and fully updated in 
2006, to help ensure that class actions do not lead to restrictions on 
challenging abusive business practices. The guidelines were intended 
to be used by consumer class action attorneys as a standard for how to 
properly proceed, manage, and settle a class action case. They were 
also intended to be used by courts as a guidepost to judge the merits 
of cases before them. The standards and revised standards were drafted 
by a committee of consumer attorneys. After initial drafts were 
completed, the draft guidelines were submitted for comment to all 
sectors of the legal community, including professors, think tanks, and 
the defense bar. After these comments were received and considered, a 
final draft was published. Further, we reviewed summary documentation 
from the National Mortgage Settlement between the state attorneys 
general, and the Departments of Justice, the Treasury, and HUD against 
the five largest mortgage servicers for errors in foreclosure 
practices to provide the context of a current example of a large-scale 
settlement involving similar stakeholders and issues similar to those 
of the foreclosure review. 

Planning and Evaluation of the Outreach and Advertising Approach: 

To determine the extent to which the planning and evaluation of the 
outreach and advertising approach considered the characteristics of 
the target audience, we analyzed key documents discussed above as well 
as the indicators and analysis prepared by the third-party 
administrator to monitor implementation of outreach activities and 
meeting agendas between regulators and servicers. We compared these 
documents to best practices for outreach campaigns on analyzing the 
target audience, identifying credible messengers, and evaluating 
outreach activities identified in our prior work.[Footnote 68] As 
discussed earlier, we considered these practices applicable to the 
outreach campaign for the foreclosure review because they are specific 
to campaigns designed to elicit a one-time action. In addition, we 
considered practices we identified in our previous work on evaluation 
strategies for information dissemination activities. These strategies 
were developed based on analysis of case studies of how five federal 
agencies evaluated their media campaigns or instructional programs. 
[Footnote 69] Finally, we considered our internal control standards on 
managing risk and other control activities.[Footnote 70] 

To identify additional characteristics to consider in an analysis of 
the target audience of eligible borrowers, we reviewed our prior work 
on foreclosure trends by congressional district as well as work on 
financial literacy. For our analysis of foreclosure trends, we 
analyzed data from LoanPerformance's Asset-backed Securities database 
for nonprime loans originated from 2000 through 2007.[Footnote 71] The 
database contains loan-level data on the majority of nonagency 
securitized mortgages in subprime and Alt-A pools. For example, for 
the period 2001 through July 2007, the LoanPerformance database 
contains information covering, in dollar terms, an estimated 87 
percent of securitized subprime loans and 98 percent of securitized 
Alt-A loans. For the purposes of the analysis conducted for our prior 
report, we defined a subprime loan as a loan in a subprime pool and an 
Alt-A loan as a loan in an Alt-A pool. We focused our analysis for 
that report on first-lien purchase and refinance mortgages for one-to-
four-family residential units. In preparing our previous report we 
tested the reliability of these data by reviewing documentation on the 
process the data providers use to collect and ensure the reliability 
and integrity of their data, and by conducting reasonableness checks 
on data elements to identify any missing, erroneous, or outlying data. 
We also interviewed LoanPerformance representatives to discuss the 
interpretation of various data fields. We concluded that the data were 
sufficiently reliable for our purposes. Nonprime loans do not 
represent the entire universe of loans--for example, they do not 
include prime loans. However, we determined that these data were 
applicable as an illustrative example of how analysis conducted below 
the state level could reveal significant concentrations of certain 
groups. 

For our analysis of characteristics associated with low financial 
literacy, we considered our prior work on financial literacy and 
trends among certain demographics with lower financial literacy. This 
work included a survey, conducted by a private research firm under 
contract to GAO, from late July to early October 2004, to determine 
the extent of consumers' knowledge of credit reporting issues. 
[Footnote 72] The telephone survey was conducted with 1,578 randomly 
sampled noninstitutionalized U.S. adults aged 18 and over and the 
results of this survey generally have confidence intervals of plus or 
minus 6 percentage points. We noted in our previous report that the 
practical difficulties of conducting a sample survey may introduce 
errors into estimates made from them. These errors include sampling, 
coverage, measurement, nonresponse, and processing errors. We made 
efforts in our prior work to minimize each of these. In addition, we 
generated an average or mean score for the survey as a whole. We then 
analyzed responses for all the survey questions and scores based on 
groups of questions for the national sample and cross-tabulated them 
across different demographic groups and across consumers with 
different credit-related experiences. Differences across demographic 
groups and across consumers with different credit-related experiences 
were tested for statistical significance at the 95-percent confidence 
level. In addition to cross-tabulations, we used a regression analysis 
of demographics and other factors that we thought would be associated 
with consumers' knowledge of credit reporting issues. We concluded 
that these data were sufficiently reliable for our purposes. We 
confirmed these results during an October 2011 forum convened by GAO 
on key issues related to financial literacy, including identification 
of special populations that need sustained financial literacy efforts. 
[Footnote 73] Forum participants included representatives from 
federal, state, and local government agencies; academic experts; 
nonprofit practitioners; and representatives from the private sector. 
We also reviewed our prior work on the financial literacy challenges 
faced by speakers of limited English (discussed earlier).[Footnote 74] 
In addition, we reviewed a government-chartered, nonprofit 
corporation's methodology to identify and reach out to their target 
audience for an outreach campaign targeted to similar borrowers in 
foreclosure or at risk of foreclosure. Finally, four of the eight 
consumer groups whom we had previously interviewed for this work 
responded to our request to identify characteristics they considered 
important to understanding the target audience of eligible borrowers. 

Interviews with Regulatory Staff and Stakeholders: 

To determine how well the development of the approach and content of 
the communication materials and website reflected best practices and 
the extent to which the planning and evaluation of the outreach and 
advertising approach considered the characteristics of the target 
audience, we conducted interviews with the following regulator staff 
and key stakeholders: 

* Staff from OCC and the Federal Reserve. 

* Representatives of five mortgage servicers and three third-party 
consultants responsible for providing third-party reviews of these 
servicers' foreclosure activities. To identify a representative mix of 
servicers and third-party consultants to interview, we considered 
servicers overseen by both regulators and those that are considered 
some of the larger servicers. 

* Representatives from the third-party administrator hired by 
servicers to administer the outreach process, including sending out 
mailings, receiving borrowers' request-for-review forms, and operating 
the toll-free customer assistance phone number and website. 

* Representatives of 11 consumer groups, community groups, and a 
mortgage servicing industry association. To identify these groups, we 
considered organizations identified by OCC and the Federal Reserve as 
stakeholders, groups receiving funding from servicers to conduct 
community outreach, organizations that provided testimony on the 
foreclosure review process, and organizations we had identified during 
the course of other work on foreclosures, including the Department of 
the Treasury's Home Affordable Modification Program.[Footnote 75] 

In addition, we reviewed speeches, testimony, and responses to 
official Questions for the Record on the outreach process provided by 
OCC and Federal Reserve officials, representatives of third-party 
consultants, and a representative from a consumer group and a mortgage 
servicing industry association. 

We conducted this performance audit from February 2012 through June 
2012 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Comments from the Office of the Comptroller of the 
Currency: 

Comptroller of the Currency: 
Administrator of National Banks: 
Washington, DC 20219: 

June 19, 2012: 

Mr. Lawrence L. Evans, Jr. 
Acting Director: 
Financial Markets and Community Investment: 
United States Government Accountability Office: 
Washington, DC 20548: 

Dear Mr. Evans: 

We have received and reviewed your draft report, "Foreclosure Review: 
Opportunities Exist to Further Enhance Borrower Outreach Efforts." We 
appreciate your contributions to further improve our outreach efforts 
to identify borrowers who suffered financial injury and are seeking 
remediation under the mortgage servicing consent orders. On behalf of 
the Office of the Comptroller of the Currency (OCC), I offer the 
following comments.[Footnote 1] 

Background and Scope: 

It is important to place these efforts in the context of the 
comprehensive enforcement actions of which they are a part. On April 
13, 2011, the OCC, the Board of Governors of the Federal Reserve 
System (Federal Reserve), and the Office of Thrift Supervision (OTS) 
issued formal consent orders against 14 mortgage servicers under their 
supervision to correct deficiencies in mortgage servicing and 
foreclosure processing.[Footnote 2] The consent orders required 
servicers to undertake substantial measures to enhance their 
compliance, vendor management, and training programs and processes. 
The orders establish strong and comprehensive standards for mortgage 
servicing and the processing of foreclosures by these servicers. 

The consent orders also required servicers to retain independent 
consultants to conduct multifaceted, independent foreclosure reviews 
for borrowers in any stage of foreclosure during 2009 or 2010. These 
reviews require the consultants to conduct extensive file reviews of 
servicer portfolios, and also include a process to allow in-scope 
borrowers to request a review of their circumstances. This latter 
process is the focus of your report Together, these two initiatives 
are generally referred to as the Independent Foreclosure Review (IFR). 
The objective of these two complementary components of the IFR is to 
identify borrowers who suffered financial injury within the scope of 
the enforcement orders and provide appropriate financial remediation 
to them. 

For this report, GAO focused on the design and implementation of the 
servicers' borrower outreach process to determine how well foreclosure 
review information is being communicated to eligible borrowers with 
different characteristics. Specifically, the GAO report addressed the 
extent to which the development of the approach and content of the 
communication materials and website reflected best practices, and the 
extent to which the servicers' planning and evaluation of the outreach 
and advertising approach considered target audience characteristics. 

GAO Recommendations: 

GAO recommended that the OCC: 

1. Enhance the readability of the request-for-review form on the 
independent foreclosure review website so that it is more 
understandable for borrowers, such as by including a plain language 
guide to the questions; 

2. Require that servicers include a range of potential remediation 
amounts or categories in communication materials and other outreach, 
such as direct mailings to borrowers, public service announcements, 
the independent foreclosure review website, regulators' websites, and 
officials' testimonies and speeches; and; 

3. Require servicers to identify trends in borrowers who have and have 
not responded by factors such as metropolitan statistical area, zip 
code, servicer, and borrower characteristics and report to the 
regulators on weaknesses found. If warranted, regulators should 
require that servicers, in consultation with their third-party 
consultants, conduct more targeted outreach to better reach 
underrepresented groups, such as considering more credible messengers 
to reach these groups. If such action cannot be taken prior to the 
deadline for requests for review, regulators should consider expanding 
the look-back review to better ensure coverage for underrepresented 
groups. 

We share the goals reflected in your report, and we are in the process 
of addressing each of your recommendations. The Appendix to this 
letter sets forth a listing of the initiatives that we have already 
undertaken that address concerns raised in the report. 

Thank you for the opportunity to comment on the draft report. 

Sincerely, 

Signed by: 

Thomas J. Curry: 
Comptroller of the Currency: 

Enclosure: 

[End of letter] 

Appendix: 

Foreclosure Consent Order: 
Significant Borrower Outreach Activities: 

The consent orders required servicers to conduct significant outreach 
to make eligible borrowers aware of the Independent Foreclosure Review 
(IFR).[Footnote 3] This outreach includes mailings, advertising, a Web 
site, a toll-free number, and work with housing counselors and 
community and housing advocate groups to reach a broad audience. 

Request-For-Review Letters and Forms: 

* Nearly 4.4 million letters have been sent to borrowers who may be 
eligible for a free independent review of their foreclosure loan 
files. Using standard techniques to validate addresses and identify 
valid secondary addresses, only 5.3 percent of those letters have been 
returned as undeliverable. 

* As part of the outreach approach, the servicers formed a consortium 
and media plan to ensure a coordinated process and uniform 
communication materials. The consortium developed the initial outreach 
letter and request-for-review form with input from third-party 
consultants and approval from the regulators. 

* In December 2011, the OCC consulted with the U.S. Department of 
Justice (DOJ) regarding measures to ensure IFR accessibility to non-
English speakers. The OCC consulted the DOJ office responsible for 
administering Executive Order 13166, Improving Access for Persons with 
Limited English Proficiency. 

* Before approving the language in the servicers' draft materials, the 
OCC also provided request-for-review materials to its Public Affairs 
and Community Affairs groups for a readability review. Changes 
consistent with the groups' suggestions were made. 

* In-language notification on outreach materials is provided in six 
languages in addition to English and Spanish—Chinese, Hmong, Korean, 
Russian, Tagalog, and Vietnamese, and some in-language notification 
about toll-free translation services is included in the request-for-
review materials. Materials are being translated into these languages. 

* Since the November 2011 request-for-review process launch, 193,630 
people have submitted the request-for-review form as of May 31, 2012. 

* A second mailing to borrowers who have not yet submitted requests 
for review will be completed by June 30, 2012, reminding them of the 
upcoming deadline. 

Paid Advertising: 

* Since foreclosure densities largely mirrored population densities, 
servicers selected a mix of national media that shared similar 
concentrations. 

* The OCC approved servicers' media plan that included advertising in 
prominent national publications, including publications that serve 
minority audiences and Spanish-language publications. 

* The first round of advertising ran in January and February 2012 in 
more than 1,400 publications nationwide that cover a wide range of 
demographics, including major publications like Parade, People 
magazine, and USA Weekend, as well as Hispanic and African-American 
publications. For example, to target the Hispanic population, Spanish-
language print advertisements were placed in 26 publications in 
communities that the servicers had identified as having large Hispanic 
populations. 

* Circulation covers all 50 states, with higher concentration in 
states with heavy foreclosure volume, including California, Florida, 
Illinois, Michigan, and New York. 

* Total impressions from the advertising to date are estimated at more 
than 341,000,000. 

* The second round of advertising was conducted in April 2012; the 
third round of advertising is expected to be completed this summer. 

* Servicers also purchased key words on search engines to help 
borrowers find information easily through major search engines such as 
Google and Bing. 

Web Site 

* On November 1, 2011, a Web site [hyperlink, 
http://www.independentforeclosurereview.com] was launched to provide 
information about the IFR process. 

* In March 2012, the Web site was enhanced to allow borrowers to 
submit requests for review and provide supporting documentation 
online, which borrowers can use 24 hours a day, seven days a week. 

* The Web site includes materials in Spanish and English. 

* The servicer consortium, in consultation with the Independent 
Consultant group and subject to OCC and FRB approval, developed the 
Web site language, including the Frequently Asked Questions. 

*  The OCC Public Relations staff reviewed the Web site language for 
readability. 

* Through May 31, 2012, the Web site has been visited 600,386 times; 
7,948 borrowers have submitted requests for review online. Online 
submissions have increased recently, following the second round 
mailing of notices to borrowers. For example, on each of three 
consecutive days during the week of June 11, 2012, borrowers 
electronically submitted more than 1,000 requests for review. 

Toll-Free Number: 

* A toll-free phone number, 1-888-952-9105, was launched on November 
1, 2011, to provide information about the reviews and the IFR process. 
Assistance is available Monday through Friday from 8 a.m. to 10 p.m., 
and Saturday from 8 a.m. to 5 p.m. (Eastern). 

* The toll-free call center has translation services available in more 
than 240 languages, and the operators can translate documents for 
borrowers over the phone. 

* Through May 31, 2012, the toll-free number has received 241,048 
calls, and 25,752 people have requested forms. 

Public Service Advertising: 

* To supplement servicers' outreach efforts, the OCC released a series 
of public service advertisements (PSA). The PSAs highlight the Web 
site, toll-free number, eligibility criteria, and the deadline for 
submitting requests for review. 

* OCC Public Affairs staff developed the PSA material. North American 
Precis Syndicate (NAPS), one of the country's leading providers of PSA 
servicers reviewed and revised the material. The OCC shared the 
materials with community groups in advance and made changes based on 
their comments. OCC PSAs typically perform in the top 1 percent of 
PSAs distributed through NAPS. 

* The PSAs included a' print article and two 30-second radio spots 
released in English and Spanish. The print items were distributed to 
more than 10,000 local newspapers and publications. The radio spots 
were distributed to more than 6,500 small radio stations throughout 
the country. 

* Spanish items were distributed to more than 700 Spanish-language 
newspapers and 500 Spanish-language radio stations. 

* A second round of public service advertising began May 1, 2012. 

* In addition to English and Spanish, material was shared with media 
outlets serving audiences in other languages (e.g., Chinese, Russian, 
Korean, Haitian). 

* The OCC reached out to radio stations and media outlets serving 
audiences who speak languages other than English and Spanish to 
promote awareness of the IFR among these communities. 

* In May 2012, the Federal Reserve also placed a video on YouTube and 
its Web site explaining how borrowers can submit a request-for-review 
form. The video is available in both English and Spanish. The video is 
also accessible on the OCC's Web site. 

PSA Results (as of June 11, 2012): 
Number of Times English Print Item Has Run: 888; 
Number of Times English Radio Item Has Run: 665; 
Subtotal for English PSA Items: 1,553; 
Number of Times Spanish Print Item Has Run: 132; 
Number of Times Spanish Radio Item Has Run: 202; 
Subtotal for Spanish PSA Items[Footnote 4]: 334; 
Total Number of Times PSA Items Have Run: 1,887; 
Combined Value of Equivalent Paid Advertising: $872,127; 
Total Potential Audience: 162,000,000; 
Number of States Where PSAs Have Appeared: 38; 
Percent of Coverage in Top 100 Markets: 75%. 

Outreach to Community and Housing Advocates: 

As part of the initial implementation of coordinated outreach 
activities, regulators reviewed the outreach plan with 19 consumer 
groups familiar with the target audience of all eligible borrowers 
and, in part based on their feedback, incorporated media outreach 
activities to reach certain populations.[Footnote 5] Since November 
2011, the OCC has benefited in its decision making with discussions 
with these groups on numerous topics, such as readability, marketing 
and outreach, added resources for non-English speakers, financial 
injury type descriptions, and improving transparency. 

* At the November 2011 request-for-review process launch, servicers 
engaged a representative from the Financial Services Roundtable (FSR) 
to host two educational outreach forums through national 
teleconferences on behalf of the entire servicer consortium group. 

* In December 2011, the OCC, FRB, Servicers and FSR (on behalf of the 
servicer consortium) participated in two sessions of the annual 
NeighborWorks training conference, attended by community group 
representatives from around the country, to provide information and 
answer questions about the foreclosure review. 

* The OCC met with representatives of the Loan Modification Scam 
Prevention Network and coordinated introductions to the servicer 
consortium, resulting in added borrower alerts for fraud or scam 
activity related to the advertisements, second mailings, and Web site 
materials. 

* The OCC also worked with the FRB to produce two nationwide webinars 
in February and March 2012. Information was accessed via live 
streaming by 534 computers and 352 phone connections, both of which 
may have had multiple participants at each site. The webinars 
familiarized counselors and advocates with the request-for-review 
process and form to help counselors assist their constituents. Since 
then, regulators have posted on their agencies' Web sites an archived 
version of the webinar and webinar transcripts in English and Spanish.
As of June 13, 2012, the archived version has been played 477 times. 

* The independent consultants have separately held a teleconference 
and several in-person meetings with consumer group representatives to 
share foreclosure review information. For example, in May 2012, 
community group representatives visited the Promontory/Bank of
America site to personally observe how reviews are being conducted. 

* The OCC worked with servicers to identify ways to provide resources 
and additional support to advocates to expand their capabilities for 
promoting participation in the IFR. 

* Several servicers adopted the regulators' suggestion to provide 
financial support to advocacy groups to enhance borrowers' familiarity 
with the IFR initiative. To date, three servicers have supported 
approximately 15 intermediary organizations with well over 100 member 
organizations servicing communities across the country. By design, the 
support permits maximum flexibility to tailor outreach activities best 
suited for the diverse clienteles the organizations serve. Groups have 
issued direct mailings, e-mails, and mass flyers, held conferences and 
workshops, conducted outreach at street fairs, offered individual and 
group counseling sessions, collaborated with other community 
organizations, and leveraged faith-based partnerships to expand IFR 
awareness. 

* Groups are also supporting two toll-free phone lines (one 
specifically for Spanish speakers) and at least 13 informational Web 
sites and have to date posted 7 announcements for scheduled IFR-
related events. They have also released two videos and issued a press 
release. Other groups are assisting borrowers in requesting and 
completing the form and assembling supplementing information and 
documents. Groups have also prepared advertising in several Asian 
languages[Footnote 6] and are developing IFR information materials in 
languages such as Hmong, Vietnamese, Korean, Russian, Tagalog, and 
Mandarin Chinese. 

Remediation: 

* On the request-for-review form and the 
www.independentforeclosurereview.com and www.occ.gov Web sites under 
the Frequently Asked Questions, borrowers can review examples of the 
types of financial injury that may lead to compensation or other 
remediation under the 1FR. 

* The OCC and the FRB will soon publicly release financial remediation 
guidance for independent consultants to use in recommending 
remediation for financial injury they identify during the IFR. The 
guidance will help to ensure that similarly situated borrowers receive 
similar treatment across all 14 servicers covered by the OCC and FRB 
consent orders. The guidance will contain additional information 
regarding dollar amounts that may be associated with particular injury 
types. 

Appendix II Footnotes: 

1. On June 14, 2012, the OCC provided to GAO specific report line 
edits that reflected both substantive comments as well as 
technical/editorial suggestions. 

2. On July 21, 2011, regulatory responsibility for federal savings 
associations transferred from the OTS to the OCC under the Dodd-Frank 
Wall Street Reform and Consumer Protection Act. Consent orders taken 
by the OTS prior to the transfer remain in effect and enforceable by 
the OCC. 

3. The OCC and FRB also outlined expectations for a comprehensive, 
independent, fair, transparent, and documented borrower outreach 
process in July 2011 guidance to servicers. 

4. Spanish-language items have run 334 times in six states with a 
total potential audience of nearly 47 million people. 

5. These organizations include the National Consumer Law Center, 
National Fair Housing Alliance, Center for Responsible Lending, 
National Association of Consumer Advocates, National Council of La 
Raza, National Asian American Coalition, and Consumer Action. 

6. Examples include: Tagalog, Korean, and Vietnamese. 

[End of section] 

Appendix III: Comments from the Board of Governors of the Federal 
Reserve System: 

Board of Governors of the Federal Reserve System: 
Sandra F. Braunstein: 
Director, Division Of Consumer And Community Affairs:
Washington, D.C. 20551: 

June 18, 2012: 

Mr. Lawrence L. Evans, Jr. 
Acting Director: 
Financial Markets and Community Investment: 
Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Mr. Evans, 

Thank you for the opportunity to comment on the draft report entitled 
"Foreclosure Review: Opportunities Exist to Further Enhance Borrower 
Outreach Efforts," GAO-12-776. 

The report examines outreach methods associated with the independent 
foreclosure review process currently being conducted by the 14 
mortgage servicers subject to the consent orders issued by the Federal 
Reserve and the Office of the Comptroller of the Currency ("the 
agencies") in April 2011. The purpose of the foreclosure review 
process is to remediate borrowers determined by an independent 
consultant to have been financially harmed from improper foreclosure 
actions in 2009 and 2010. The draft report acknowledges important 
steps the Federal Reserve and the OCC have taken to improve the 
borrower outreach process. We appreciate the GAO's recognition of our 
efforts to ensure that as many financially injured borrowers as 
possible participate in this unprecedented effort. In response to the 
main issues raised in the draft report, we would like to provide 
additional context for the outreach steps taken as well as address the 
recommendations given to improve future outreach efforts. 

As noted in the report, the consent orders required servicers to use 
two methods to identify potentially eligible borrowers for remediation 
among the approximately 4.3 million borrowers covered by the 
foreclosure review process—a file review (or "look-back" review) and a 
claims process. The "look-back" review requires independent 
consultants retained by the servicers to examine specific borrower 
files, including those representing high-risk categories, such as 
military borrowers with foreclosure protections under the 
Servicemembers Civil Relief Act, foreclosure-related complaints filed 
before the borrower outreach program was launched, foreclosure actions 
where a complete request for a loan modification was pending at the 
time of the foreclosure, and foreclosure actions that occurred when 
the borrower was not in default on a trial or permanent modification. 
The Federal Reserve requires a 100 percent review of files with these 
high-risk factors. 

To supplement the "look-back" review, the agencies further directed 
servicers to undertake an outreach campaign to reach all covered 
borrowers who may have been injured, an approach unique to a federal 
consent order process. Under the borrower outreach process, the 
servicers arc required to contact all 4.3 million borrowers covered by 
the foreclosure review and provide them with the opportunity to 
request a review of their foreclosure by an independent consultant to 
determine whether the borrower suffered financial injury because of 
errors by the servicer. 

In reviewing the servicers' efforts under the outreach process, the 
Federal Reserve, working with the OCC, made substantial efforts to 
maximize the likelihood that all affected borrowers would receive the 
request form and would understand the communications. Among other 
things, the agencies initially consulted with the Department of 
Justice (DOJ) for guidance on enhancing the borrower outreach process 
and covering a broader spectrum of non-English speakers. In connection 
with those consultations, the agencies took several significant steps 
to expand understanding of the mailings, including translating 
information about where to call to learn more about the independent 
foreclosure review on mailings in seven non-English languages spoken 
by borrowers (Spanish, Chinese, Korean, Hmong, Tagalog, Vietnamese and 
Russian), and equipping the call center with a telephonic 
interpretation service to provide assistance in over 200 languages. 

We note that the focus of the outreach for the independent foreclosure 
review is distinguishable from outreach activities conducted for 
settlement of private class-action suits. In the case of borrower 
outreach for class actions, solicitations are made to a class of 
injured parties who have already been identified. Compensation through 
a class action is usually a predetermined amount of monetary relief 
proportionally divided among the class. The agencies' consent orders, 
however, remediate for specific individual harm. Even with the 
publication of guidelines detailing potential monetary remedies for 
specific types of injuries, an evaluation of an individual's 
foreclosure action must be conducted to determine the appropriate 
compensation level specific to the injuries covered by the consent 
order. Unlike the typical class action, the number of injured 
borrowers who are eligible for compensation under the agencies' 
enforcement actions and the total amount of compensation to be paid 
cannot be determined until the outreach process and review of 
individual borrowers' foreclosures has been completed. Therefore, we 
find the report's comparison between the consent orders and class 
actions to be imprecise and not appropriate. 

The report comments on the readability of the borrower outreach 
materials in relation to the Plain Writing Act of 2010. To the extent 
the Act applies to borrower outreach program communication materials, 
the Federal Reserve believes the Act's requirements have been met.
Federal plain language guidelines note that legal language and 
technical terms may be necessary, but suggest that agencies avoid 
"unnecessarily complicated, technical language used to impress, rather 
than to inform, [the] audience." For complex mortgage terms that did 
not translate easily into other languages, the Federal Reserve 
consulted with multilingual staff in its Legal and Consumer and 
Community Affairs divisions, as well as with consumer and housing 
counseling groups, to improve the understanding of these technical 
terms. We also note that readability formulas, in determining how hard 
a piece of writing is to read, generally score the readability of 
written material based on quantitative measures, such as average 
number of syllables in words or numbers of words in sentences to 
assess the ease with which text can be read and understood. The 
primary limitation on such formulas is that they do not take into 
account the content of the document being evaluated; no formula can 
determine whether the information has been conveyed clearly.[Footnote 
1] 

The agencies held several meetings with consumer groups, in part to 
receive their feedback on the accessibility of the outreach materials. 
This feedback was incorporated in the advertisements and subsequent 
mailings to borrowers to improve the readability of the materials. 
including by broadening the use of Spanish translations, and making 
more prominent the agencies' monitoring role in the process to give 
assurances of the foreclosure review's legitimacy. The GAO 
acknowledges positive feedback to the communication materials from 
consumer groups over the course of the outreach campaign. The Federal 
Reserve views this response as validation that the agencies are taking 
appropriate measures to make sure that the borrower outreach 
communication materials are clear and orderly, do not include 
unnecessary legal and technical language, and are likely to be 
understood by the audience. 

Along with taking additional measures to ensure the accessibility of 
language in the outreach materials, the Federal Reserve developed a 
variety of additional outreach tools to broaden the reach of the 
foreclosure review process. As part of the outreach effort to increase 
program awareness and promote borrower participation, the agencies 
conducted outreach sessions targeted to housing counseling agencies. 
These sessions included two webinars (February 29, 2012 and March 6, 
2012) moderated by the independent consultants, with participation 
from the agencies to answer questions, to provide these organizations 
with information on the process and to train them on ways to assist 
borrowers to complete the request for review form. Materials from the 
March 6th webinar, including the transcript and FAQs, are available on 
the agencies' public websites in English and Spanish. The webinars 
attracted a total of 1,107 participants, via online streaming and 
phone conference bridges. Over 80% of the webinar survey respondents 
found the webinar training presentations were well organized, met 
their information needs, and improved their understanding of the 
review form. From the date of the March webinar through mid-June, the 
Federal Reserve's web page where the webinar video is posted has been 
visited 1,900 times. In addition to the webinars, the Federal Reserve 
produced videos in English and Spanish explaining the foreclosure 
review and posted them on the Federal Reserve's website and YouTube 
channel. A link to these videos was published on the Federal Reserve's 
Twitter feed to expand outreach efforts through social media channels. 
In the first week of the release alone, there were 4,300 views of the 
YouTube video. Federal Reserve staff also participated in outreach 
events held in Federal Reserve Bank districts to discuss the 
foreclosure review process with local groups. 

The report recommends three actions that the Federal Reserve should 
take to build upon initial outreach efforts to provide more 
opportunity for borrowers to request an independent foreclosure 
review. Consistent with our basic objective of continuously trying to 
improve the borrower outreach process, the Federal Reserve has begun 
implementation of all recommended actions. First, to address the 
recommendation of enhancing the readability of the Request-for-Review 
form, the agencies have adopted the GAO's suggestion of developing a 
plain language guide for borrowers completing the form. The guide will 
be posted to the agencies' and independent foreclosure review web 
sites. Text for the guide comes principally from the webinar 
materials, which evaluation ratings show participants found clear and 
accessible. 

The second recommendation requires the inclusion of potential 
remediation amounts or categories in communication material and other 
outreach. The agencies plan to soon publish a remediation framework, 
which describes a range of possible injuries and potential remediation 
amounts covered by the independent foreclosure review process. We 
expect that the agencies' press releases will announce the 
availability of the framework on the regulators' and independent 
foreclosure review websites, as well as the accompanying Frequently-
Asked-Questions document to provide additional guidance to borrowers. 
The agencies also plan to hold a briefing with several national 
consumer and housing counseling groups to address questions on the 
framework. 

The third recommendation is for servicers to identify trends among 
borrower respondents and non-respondents by characteristics that can 
assist with target outreach to underrepresented groups. Based on 
servicer data, the Federal Reserve is assisting in this effort by 
preparing geocoded maps of the location information where mailings to 
borrowers were sent and where forms have been received with 2010 
Census Data to better identify response gaps by geography and certain 
borrower characteristics. This data will be released publicly to 
promote targeted outreach efforts. 

The Federal Reserve takes seriously its responsibility to monitor the 
implementation and execution of the requirements of its April 2011 
enforcement actions, including providing an opportunity for borrowers 
who believe they suffered direct financial injury from their 
foreclosure action to apply for an independent review. We understand 
that implementing and executing those requirements effectively is 
critical to ensuring that borrowers are compensated for financial 
injury they suffered as a result of errors, misrepresentations, or 
other deficiencies in the foreclosure process. 

We will continue to monitor these issues and instruct our supervised 
institutions to take reasonable steps to improve outreach efforts. We 
appreciate the professionalism of the GAO's review team in conducting 
this study. The Federal Reserve and the OCC undertook the enforcement 
actions to help millions of borrowers affected by servicer errors and 
we appreciate the GAO's assistance in implementing this goal. 

Sincerely, 

Signed by: 

Sandra Braunstein: 

Appendix III Footnotes: 

1. U.S. Securities and Exchange Commission, Plain English Handbook: 
How to Create Clear SEC Disclosure Documents (Washington, D.C.: 1998). 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Lawrance L. Evans, Jr. (202) 512-8678 or evansl@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Karen Tremba (Assistant 
Director), Jonathan Kucskar, Grant Mallie, Patricia MacWilliams, Marc 
Molino, Jill Naamane, Carl Ramirez, Robert Rieke, Jennifer Schwartz, 
Andrew Stavisky, and James Vitarello made key contributions to this 
report. 

[End of section] 

Footnotes: 

[1] The 14 servicers are Ally Bank/GMAC, Aurora Bank, Bank of America, 
Citibank, EverBank, HSBC, JP Morgan Chase, MetLife, OneWest, PNC, 
Sovereign Bank, SunTrust, U.S. Bank, and Wells Fargo. The Office of 
the Comptroller of the Currency (OCC) assumed oversight responsibility 
of federal savings associations from the Office of Thrift Supervision 
(OTS) in July 2011. 

[2] Types of financial injury could include, for example, if the 
mortgage balance amount at the time of the foreclosure action was more 
than the borrower actually owed, the mortgage payment was inaccurately 
applied, fees were inaccurately applied, the foreclosure occurred 
while the borrower was making on-time payments in a loan modification 
or was protected by bankruptcy, or the borrower was improperly denied 
a loan modification. This list does not include all situations. 

[3] See, e.g., 12 U.S.C. § 1813(q). 

[4] In July 2011, OCC assumed oversight responsibility of federal 
savings associations from OTS. Concurrently, the Federal Deposit 
Insurance Corporation (FDIC) assumed oversight responsibility of state-
chartered savings associations from OTS, and the Board of Governors of 
the Federal Reserve System (Federal Reserve) assumed oversight 
responsibility of savings and loan holding companies and lenders owned 
by a savings and loan holding company from OTS. 

[5] Federal consumer financial law includes over a dozen federal 
consumer protection laws, including the Truth in Lending Act, the Real 
Estate Settlement Procedures Act, and the Equal Credit Opportunity 
Act, as well as title X of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act. Pub. L. No. 111-203, § 1002(12), (14), 124 
Stat. 1376, 1957, 12 U.S.C. § 5481(12), (14). 

[6] One of those orders was jointly issued by the FDIC and the Federal 
Reserve. 

[7] The Federal Reserve released the engagement letter for the last 
institution in May 2012. 

[8] The Servicemembers Civil Relief Act (SCRA) restricts foreclosure 
of properties owned by active duty members of the military. Pub. L. 
No. 108-189, § 303, 50 U.S.C. app. § 533 (2003). This provision 
applies to loans originated before the servicemember's active military 
service. We have ongoing work on various aspects of federal oversight 
of SCRA compliance. 

[9] Statement by Scott G. Alvarez, General Counsel, Board of Governors 
of the Federal Reserve System, before the Subcommittee on Housing, 
Transportation, and Community Development, Committee on Banking, 
Housing, and Urban Affairs, United States Senate, Washington, D.C. 
December 13, 2011. 

[10] Statement by John Walsh, Acting Comptroller of the Currency, 
before the 2012 National Interagency Community Reinvestment 
Conference, Seattle, Washington, March 26, 2012. 

[11] The 4.3 million people represents those people whose mortgages 
securing their primary residence was serviced by one of the covered 
servicers and were subject to any stage of the foreclosure process in 
2009 or 2010. It does not suggest a number of people who may or may 
not have been financially harmed by errors in that process. 

[12] Specifically, all addresses on file were run through a national 
change of address database to identify a more current address. 
Borrower addresses were also processed through a third-party consumer 
database using information from sources such as credit bureaus, public 
records/registrations, utilities, and phone number databases to 
determine the most likely current addresses. Any returned mail from 
the next contact attempt was processed using human judgmental 
decisioning to determine most likely current addresses. These efforts 
resulted in an undeliverable rate of 5.3 percent. 

[13] The website is: [hyperlink, 
http://www.independentforeclosurereview.com]. 

[14] See GAO, Credit Cards: Increased Complexity in Rates and Fees 
Heightens Need for More Effective Disclosures to Consumers, 
[hyperlink, http://www.gao.gov/products/GAO-06-929] (Washington, D.C.: 
Sept. 12, 2006). In this report we assessed the effectiveness of the 
disclosures that credit card issuers are required by federal 
regulations to provide to cardholders in terms of their usability or 
readability, among other things. 

[15] See GAO, Digital Television Transition: Increased Federal 
Planning and Risk Management Could Further Facilitate the DTV 
Transition, [hyperlink, http://www.gao.gov/products/GAO-08-43] 
(Washington, D.C.: Nov. 19, 2007). For this report we convened an 
expert panel to identify a list of key practices for planning a 
consumer education campaign. While this list was created with the 
digital television transition campaign in mind, the panel focused on 
communication campaigns that are intended to elicit a one-time action 
or behavior change. The goal in creating this list was that it could 
be used to provide a framework for evaluating other consumer education 
outreach programs as well. 

[16] The Plain Writing Act of 2010. Pub. L. No. 111-274 (2010), 5 
U.S.C. § 301 Note. Guidance to agencies on implementing this act from 
the Office of Management and Budget states that plain writing can be 
essential to the successful achievement of administrative goals and 
that documents explaining to the public how to comply with a 
requirement that the federal government enforces are covered under the 
act. 

[17] Federal Plain Language Guidelines, March 2011, Revision 1, May 
2011. These guidelines state that testing is recommended for documents 
such as websites, brochures, applications, mobile websites, videos, 
social media, and public affairs messages. 

[18] U.S. Securities and Exchange Commission, A Plain English 
Handbook: How to Create Clear SEC Disclosure Documents (Washington, 
D.C.: August 1998). 

[19] According to regulatory staff, the August 2011 deadline was 
extended when it became apparent that the coordinated approach would 
require additional time. 

[20] 1992 National Adult Literacy Survey. The 2003 National Assessment 
of Adult Literacy (renamed from 1992) found that reading comprehension 
levels did not significantly change between 1992 and 2003 and that 
there was little change in adults' ability to read and understand 
sentences and paragraphs. No further assessments have been conducted 
since 2003. 

[21] See [hyperlink, http://www.gao.gov/products/GAO-06-929]. The 
Securities and Exchange Commission regulates the issuance of 
securities to the public, including the information that companies 
provide to their investors and has developed a handbook for issuers on 
how to create clear disclosure documents. 

[22] Statement by Alys Cohen, National Consumer Law Center, before the 
Subcommittee on Housing, Transportation, and Community Development, 
Committee on Banking, Housing, and Urban Affairs, United States 
Senate, Washington, D.C.: December 13, 2011. According to this 
statement, the Flesch-Kincaid grade level test in Microsoft Word's 
grammar-check tool scored the cover letter at a 14.2 grade level and 
the request-for-review form at a 13.5 grade level. We did not validate 
these results. 

[23] The three readability scoring tests conducted were the Flesch-
Kincaid Formula, Gunning Frequency of Gobbledygook (FOG) Readability 
Test, and McLaughlin Simplified Measure of Gobbledygook (SMOG) 
Formula. See appendix I for more information about these tests and the 
results. 

[24] In the Census Bureau data, English speaking ability is self-
reported by adults ages 18 and over who have indicated that they speak 
a language other than English at home. The survey, which is provided 
in multiple languages, allows respondents to choose between speaking 
English "very well," "well," "not well," or "not at all." Other 
sources may use different definitions for limited English proficiency. 

[25] See GAO, Consumer Finance: Factors Affecting the Financial 
Literacy of Individuals with Limited English Proficiency, [hyperlink, 
http://www.gao.gov/products/GAO-10-518] (Washington, D.C.: May 21, 
2010). 

[26] Regulatory staff also noted that they required servicers to make 
Spanish-speaking representatives available at the toll-free call 
center, which also has translation services available in over 200 
languages and operators to translate documents for borrowers over the 
phone. 

[27] The agencies consulted with attorneys at the Department of 
Justice responsible for administering Executive Order 13166, Improving 
Access to Services for Persons with Limited English Proficiency. 

[28] See [hyperlink, http://www.gao.gov/products/GAO-10-518]. 

[29] Brenda Muńiz, Financial Education in Latino Communities: An 
Analysis of Programs, Products, and Results/Effects, National Council 
of La Raza (Washington, D.C.: 2004). 

[30] Our choice in selecting outreach examples used in class action 
lawsuits is based on the regulators informing us that this is their 
chosen model of outreach. After reviewing outreach examples on class 
action lawsuits, we found that they contained several illustrative 
principles that may improve the servicers' outreach and the borrowers' 
response rates overall. 

[31] The Federal Judicial Center (FJC) is the education and research 
agency for the federal courts. Congress created the FJC in 1967 to 
promote improvements in judicial administration in the courts of the 
United States. These models were developed by FJC at the request of 
the Subcommittee on Class Actions of the U.S. judicial branch's 
Advisory Committee. 

[32] The National Association of Consumer Advocates is a nonprofit 
association of attorneys and consumer advocates committed to 
representing customers' interests. Its members are private and public 
sector attorneys, legal services attorneys, law professors and law 
students whose primary focus is the protection and representation of 
consumers. 

[33] National Mortgage Settlement website is: [hyperlink, 
http://www.nationalmortgagesettlement.com/]. 

[34] See GAO, Troubled Asset Relief Program: Results of Housing 
Counselors Survey on Borrowers' Experiences with the Home Affordable 
Modification Program, [hyperlink, 
http://www.gao.gov/products/GAO-11-367R] (Washington, D.C.: May 26, 
2011). 

[35] The remediation that Federal Reserve-regulated servicers are 
required to provide financially injured borrowers identified during 
the foreclosure review is in addition to the monetary sanctions that 
the Federal Reserve has assessed against certain of the institutions 
subject to consent orders and any associated consumer relief under the 
national mortgage settlement. Federal Reserve staff told us that some 
of the same institutions in the foreclosure review are also subject to 
the national mortgage settlement and the Federal Reserve has allowed 
the institutions it supervises to satisfy the Federal Reserve's 
monetary sanctions by providing consumer relief under the national 
mortgage settlement. According to an OCC press release, OCC announced 
agreements in principle with the servicers it supervises to hold in 
abeyance imposition of penalties provided the servicers make payments 
and take other actions under the national mortgage settlement with a 
value equal to at least the penalty amounts that each servicer 
acknowledges that OCC could impose. 

[36] Remarks by John Walsh, Acting Comptroller of the Currency before 
the 2012 National Interagency Community Reinvestment Conference, 
Seattle, March 26, 2012. 

[37] Regulators released the remediation framework on June 21, 2012. 

[38] Testimony by Suzanne G. Killian, Federal Reserve Board, Committee 
on Oversight and Government Reform, U.S. House of Representatives, on 
March 19, 2012. 

[39] Federal Reserve video: [hyperlink, 
http://www.federalreserve.gov/consumerinfo/independent-foreclosure-
review.htm]. 

[40] Testimony by Morris Morgan, Office of the Comptroller of the 
Currency before the Oversight and Government Reform, U.S. House of 
Representatives, on March 19, 2012. 

[41] Regulatory staff point out that these 22 examples of financial 
injury are demonstrative and more types of financial injury could 
exist. 

[42] Regulators released the remediation framework on June 21, 2012. 

[43] Remarks by John Walsh, Acting Comptroller of the Currency, before 
the 2012 National Interagency Community Reinvestment Conference, 
Seattle, March 26, 2012. 

[44] Servicers placed advertisements in Parade Magazine, USA Weekend, 
People Magazine, and TV Guide. 

[45] According to Federal Reserve staff, the regulator had already 
planned to conduct some outreach in Spanish prior to meeting with 
community groups. 

[46] Since mid-March, in-language notification on outreach materials, 
including advertisements and the second mailing, was provided in six 
languages--Chinese, Hmong, Korean, Russian, Tagalog, and Vietnamese. 

[47] Servicers purchased advertisements in Jet magazine. 

[48] See [hyperlink, http://www.gao.gov/products/GAO-08-43]. 

[49] See GAO, Loan Performance and Negative Home Equity in the 
Nonprime Mortgage Market, [hyperlink, 
http://www.gao.gov/products/GAO-10-146R] (Washington, D.C.: Dec. 16, 
2009). 

[50] In March 2009, Congress appropriated $6 million to NeighborWorks 
America to develop a national public education campaign about loan 
modification scams. 

[51] See GAO, Credit Reporting Literacy: Consumers Understood the 
Basics but Could Benefit from Targeted Educational Efforts, 
[hyperlink, http://www.gao.gov/products/GAO-05-223] (Washington, D.C.: 
Mar. 16, 2005) and [hyperlink, 
http://www.gao.gov/products/GAO-10-518]. In addition, research on 
financial literacy and mortgage delinquency found that subprime 
borrowers with low financial literacy were four times more likely to 
go into foreclosure than borrowers with high financial literacy. See 
Kristopher Gerardi, Lorenz Goette, and Stephan Meier, "Financial 
Literacy and Subprime Mortgage Delinquency: Evidence from a Survey 
Matched to Administrative Data," Federal Reserve Bank of Atlanta, 
Working Paper 2010-10 (April 2010). 

[52] See Janet L. Yellen, Housing Market Developments and Their 
Effects on Low-and Moderate-Income Neighborhoods, Remarks at the 2011 
Federal Reserve Bank of Cleveland Policy Summit (Cleveland, Ohio: June 
9, 2011). 

[53] As discussed earlier, in the Census Bureau data, English speaking 
ability is self-reported by adults ages 18 and over who have indicated 
that they speak a language other than English at home. Our results are 
reported with 95 percent confidence intervals. See appendix I for 
additional discussion of our methodology. 

[54] See GAO, Standards for Internal Control in the Federal 
Government, [hyperlink, 
http://www.gao.gov/products/GAO/AIMD-00-21.3.1] (Washington, D.C.: 
November 1999). 

[55] See [hyperlink, http://www.gao.gov/products/GAO-08-43]. 

[56] In addition to the webinars, regulators facilitated two 
discussions about the foreclosure review process with community group 
representatives at an annual conference sponsored by NeighborWorks 
America, a government-chartered nonprofit corporation, and OCC staff 
met with community group representatives participating in 
NeighborWorks America's Loan Modification Scam Alert Campaign. 

[57] The U.S. Department of Housing and Urban Development (HUD) 
annually awards competitive grants to approved housing counseling 
agencies to help them carry out their counseling efforts, including 
marketing and outreach. However, for fiscal year 2012, HUD's housing 
counseling program appropriation was approximately half the fiscal 
year 2010 level, and funding was eliminated for fiscal year 2011. In 
addition, the federal government has provided targeted support for 
foreclosure mitigation counseling, including through the National 
Foreclosure Mitigation Counseling (NFMC) program. However, according 
to the Administrator of the NFMC program, foreclosure review-related 
activities are not eligible for NFMC funding. 

[58] According to Federal Reserve staff, two additional servicers have 
held discussions with community groups to raise awareness about the 
foreclosure review, but these efforts did not involve providing 
funding to these groups. 

[59] In May 2012, the Federal Reserve also placed a video on YouTube 
and the Federal Reserve website explaining how borrowers can submit a 
request-for-review form. The video is available in both English and 
Spanish. 

[60] See GAO, Internal Control Management and Evaluation Tool, 
[hyperlink, http://www.gao.gov/products/GAO-01-1008G] (Washington, 
D.C.: August 2001). 

[61] As discussed previously, generally third-party consultants are 
using statistical techniques to select samples of files from various 
categories of loans for the look-back review. For some high-risk 
categories consultants are required to review 100 percent of files. 
These high-risk categories include cases involving borrowers protected 
by SCRA and certain bankruptcy cases. In addition, the Federal Reserve 
is also requiring 100 percent review of cases in several additional 
high-risk categories, including foreclosure-related complaints filed 
before the outreach program was launched, foreclosure actions where a 
complete request for a loan modification was pending at the time of 
the foreclosure, and foreclosure actions that occurred when the 
borrower was not in default. 

[62] See [hyperlink, http://www.gao.gov/products/GAO-08-43]. 

[63] See [hyperlink, http://www.gao.gov/products/GAO-06-929]. 

[64] Edits we made to the text included deleting trailing periods, 
carriage returns, and bullet points or numbered lists. We also removed 
addresses, phone numbers, and Internet addresses and added periods 
after heading phrases. 

[65] See [hyperlink, http://www.gao.gov/products/GAO-10-518]. 

[66] See [hyperlink, http://www.gao.gov/products/GAO-10-518]. 

[67] Regulatory staff informed us that they chose a class action model 
of outreach for the independent foreclosure review as outreach from 
class action lawsuits were most similar. 

[68] See [hyperlink, http://www.gao.gov/products/GAO-08-43]. 

[69] See GAO, Program Evaluation: Strategies for Assessing How 
Information Dissemination Contributes to Agency Goals, [hyperlink, 
http://www.gao.gov/products/GAO-02-923] (Washington, D.C.: Sept. 30, 
2002). 

[70] See [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
and [hyperlink, http://www.gao.gov/products/GAO-01-1008G]. 

[71] See [hyperlink, http://www.gao.gov/products/GAO-10-146R]. 
LoanPerformance is a unit of First American CoreLogic, Incorporated. 

[72] For additional discussion of the results and methodology, see 
[hyperlink, http://www.gao.gov/products/GAO-05-223]. 

[73] For a discussion of the results of the forum, see [hyperlink, 
http://www.gao.gov/products/GAO-12-299SP]. 

[74] See [hyperlink, http://www.gao.gov/products/GAO-10-518]. 

[75] See [hyperlink, http://www.gao.gov/products/GAO-11-367R]. 

[End of section] 

GAO’s Mission: 

The Government Accountability Office, the audit, evaluation, and 
investigative arm of Congress, exists to support Congress in meeting 
its constitutional responsibilities and to help improve the 
performance and accountability of the federal government for the 
American people. GAO examines the use of public funds; evaluates 
federal programs and policies; and provides analyses, recommendations, 
and other assistance to help Congress make informed oversight, policy, 
and funding decisions. GAO’s commitment to good government is 
reflected in its core values of accountability, integrity, and 
reliability. 

Obtaining Copies of GAO Reports and Testimony: 

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through GAO’s website [hyperlink, http://www.gao.gov]. Each 
weekday afternoon, GAO posts on its website newly released reports, 
testimony, and correspondence. To have GAO e-mail you a list of newly 
posted products, go to [hyperlink, http://www.gao.gov] and select 
“E-mail Updates.” 

Order by Phone: 

The price of each GAO publication reflects GAO’s actual cost of 
production and distribution and depends on the number of pages in the 
publication and whether the publication is printed in color or black 
and white. Pricing and ordering information is posted on GAO’s 
website, [hyperlink, http://www.gao.gov/ordering.htm]. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or 
TDD (202) 512-2537. 

Orders may be paid for using American Express, Discover Card, 
MasterCard, Visa, check, or money order. Call for additional 
information. 

Connect with GAO: 

Connect with GAO on facebook, flickr, twitter, and YouTube.
Subscribe to our RSS Feeds or E mail Updates. Listen to our Podcasts.
Visit GAO on the web at [hyperlink, http://www.gao.gov]. 

To Report Fraud, Waste, and Abuse in Federal Programs: 

Contact: 
Website: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]; 
E-mail: fraudnet@gao.gov; 
Automated answering system: (800) 424-5454 or (202) 512-7470. 

Congressional Relations: 

Katherine Siggerud, Managing Director, siggerudk@gao.gov, (202) 512-4400
U.S. Government Accountability Office, 441 G Street NW, Room 7125
Washington, DC 20548. 

Public Affairs: 
Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800
U.S. Government Accountability Office, 441 G Street NW, Room 7149 
Washington, DC 20548.