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entitled 'Foreclosure Review: Opportunities Exist to Further Enhance
Borrower Outreach Efforts' which was released on July 5, 2012.
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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 Muñiz, 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]
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