Office of the Comptroller of the Currency Board of Governors of the Federal Reserve System

JUNE 21, 2012 FINANCIAL REMEDIATION FRAMEWORK FOR USE IN THE INDEPENDENT FORECLOSURE REVIEW
In April 2011, federal banking regulators issued enforcement orders against 14 large mortgage servicers for deficient mortgage servicing and foreclosure practices. The orders required those servicers to retain independent consultants to conduct a comprehensive review of foreclosures that were in process or completed in 2009 or 2010 (the Independent Foreclosure Review) to identify financial injury to borrowers that resulted from errors, misrepresentations, and other deficiencies in the foreclosure process. The Independent Foreclosure Review also requires those servicers to provide compensation or other remediation for identified financial injury. The OCC and FRB have developed a financial remediation framework (the Framework) that provides examples of situations where compensation or other remediation is required for financial injury due to servicer errors, misrepresentations, or other deficiencies. The independent consultants will use the Framework to recommend remediation for financial injury identified during the Independent Foreclosure Review. The servicers will prepare remediation plans based on the independent consultants recommendations. The federal banking regulators must approve each servicers remediation plan. The categories included in the Framework are not intended to be exhaustive or to cover all possible situations or remediation options for borrowers who may require compensation or other remediation for financial injury. It is important to read the Frequently Asked Questions (FAQs) that accompany the Framework to understand how remediation will work.

OCC FRB Financial Remediation Framework

Independent Foreclosure Review
No. CATEGORY ERROR DESCRIPTION FORECLOSUREINPROCESS (ATTIMEOFREMEDIATION ) Remedy DollarPayment Suspendforeclosure. N/A FORECLOSURECOMPLETE (ATTIMEOFREMEDIATION ) Remedy Dollar Payment Rescindforeclosurewhenpossible; $15,000 pay$15,000,correctservicerrecord foranyimproperamounts,and correctcreditreports. Ifrescissionofforeclosureisnot $125,000 possible;pay$125,000plusequity, plusequity remedydeficiency,andcorrect creditreports. 2 BorrowerNotin Borrowernotin Default defaultwhen foreclosure occurredorin defaultasdirect resultofservicer error Servicerinitiatedforeclosureorforeclosed onborrowerwhowasnotindefaulton mortgageorindefaultonlydirectlydueto servicererror. Cancelforeclosure;pay$5,000,correct $5,000 servicerrecordforlatefees, foreclosurefees,and/oranyother improperamounts,andcorrectcredit reports. Rescindforeclosurewhenpossible; $15,000 pay$15,000,correctservicerrecord foranyimproperamounts,and correctcreditreports.

1 Servicemembers SCRAviolation CivilReliefAct (SCRA)

Servicerforeclosedonaborrowerin violationoftheSCRA.

Ifrescissionofforeclosureisnot $125,000 possible;pay$125,000plusequity, plusequity remedydeficiency,andcorrect creditreports. $5,000 Suspendforeclosureasrequiredby program;pay$5,000,provide permanentloanmodification,correct servicerrecordforanyimproper amounts,andcorrectcreditreports. Rescindforeclosurewhenpossible $15,000 andprovidepermanentloan modification;pay$15,000,correct servicerrecordforanyimproper amounts,andcorrectcreditreports.

3a ErrorafterTrial Failuretoconvert Servicerfailedtoconvertborrowerto LoanModification writtentrialperiod permanentmodificationaftersuccessful plantopermanent completionofwrittentrialperiodplan. Completed modification

Ifservicercannotprovidepermanent $35,000 loanmodification;pay$35,000, correctservicerrecordforany improperamounts,andcorrectcredit reports.

$125,000 Ifrescissionofforeclosureisnot possible;pay$125,000plusequity, plusequity, remedydeficiencyforanyimproper lessoffset amounts,andcorrectcreditreports. Servicermayoffsetmissedand unpaidprincipal&interest paymentsandpropertytaxespaid onbehalfoftheborrower,subjectto certainlimitations.

OCC FRB Financial Remediation Framework

Independent Foreclosure Review
No. CATEGORY ERROR DESCRIPTION FORECLOSUREINPROCESS (ATTIMEOFREMEDIATION ) Remedy DollarPayment N/A FORECLOSURECOMPLETE (ATTIMEOFREMEDIATION ) Remedy Dollar Payment Rescindforeclosurewhenpossible $15,000 andprovidetrialperiodplan;pay $15,000,correctservicerrecordfor anyimproperamounts,andcorrect creditreports.

3b ErrorafterTrial Foreclosure LoanModification completedduring Approved writtentrialperiod planfora permanent modification

Servicerforeclosedonborrowerpriorto N/A expirationofwrittentrialperiodplanwhile borrowerwasperformingallrequirementsof thewrittentrialperiodplan.

Ifrescissionofforeclosureisnot $125,000 possible;pay$125,000plusequity, plusequity, remedydeficiencyforanyimproper lessoffset amounts,andcorrectcreditreports. Servicermayoffsetmissedand unpaidprincipal&interest paymentsandpropertytaxespaid onbehalfoftheborrower,subjectto certainlimitations. 4 ForbearancePlan Foreclosure completedwhen borrower performingunder documented forbearanceplan Servicercompletedforeclosureonborrower N/A beforedocumentedforbearanceperiod expiredwhileborrowerwasmeetingall requirementsofdocumentedforbearance plan. N/A Rescindforeclosurewhenpossible; $15,000 pay$15,000,correctservicerrecord foranyimproperamounts,and correctcreditreports.

$60,000plus Ifrescissionofforeclosureisnot possible;pay$60,000plusequity, equity, remedydeficiencyforanyimproper lessoffset amounts,andcorrectcreditreports. Servicermayoffsetmissedand unpaidprincipal&interest paymentsandpropertytaxespaid onbehalfoftheborrower,subjectto certainlimitations.

OCC FRB Financial Remediation Framework

Independent Foreclosure Review
No. CATEGORY ERROR DESCRIPTION FORECLOSUREINPROCESS (ATTIMEOFREMEDIATION ) Remedy DollarPayment Suspendforeclosureasrequiredby $2,500 programandwhereloanmodification permittedbasedonpast documentation;pay$2,500,provide loanmodificationforwhichborrower shouldhavebeenapproved,correct servicerrecordforexcessinterest,late fees,foreclosurefees,and/orany otherimproperamounts,andcorrect creditreports. FORECLOSURECOMPLETE (ATTIMEOFREMEDIATION ) Remedy Dollar Payment Rescindforeclosureandprovide $5,000 loanmodificationforwhich borrowershouldhavebeen approvedbasedonpast documentationwhenpossible;pay $5,000,correctservicerrecordfor excessinterest,latefees,foreclosure fees,and/oranyotherimproper amounts,andcorrectcreditreports.

5 LoanModification Loanmodification Application applicationdenied inerror,or completeloan modification applicationwhere borrowerwould havequalifiedwas neverdecisioned

Servicerdeniedborrowerapplicationfor loanmodificationthatshouldhavebeen approved,orservicerfailedtodecision completeloanmodificationapplicationfor whichborrowerwouldhavequalified.

$10,000 Suspendforeclosureasrequiredby programandwhereloanmodification notpermittedbasedonpast documentation;pay$10,000,offer existingloanmodificationorotherloss mitigationprograms,correctservicer recordforexcessinterest,latefees, foreclosurefees,and/oranyother improperamounts,andcorrectcredit reports. Pay$2,000andofferexistingloan 6 LoanModification Nofollowupon Servicerneverfolloweduptoobtain Application loanmodification completeloanmodificationdocumentsas modificationorotherlossmitigation programs. application requiredunderHAMPorotherprogram designatedbyregulator. Pay$1,000andofferexistingloan 7 LoanModification Neversolicited Servicerneversolicitedborrowerloan Application loanmodification modificationoptionasrequiredunderHAMP modificationorotherlossmitigation programs. orotherprogramdesignatedbyregulator. 8 LoanModification Failedtoapprove Application modificationin prescribed timeframe Servicerapprovedborrowerforloan Correctservicerrecordforexcess modificationunderHAMPorotherprogram interestaccruedbyborrower. designatedbyregulator,butdidnotmake decisionwithinrequiredtimeframe. $2,000

Ifeitherrescissionofforeclosureis $15,000plus equity notpossibleorwhereloan modificationnotpermittedbasedon pastdocumentation;pay $15,000 plusequity,remedydeficiencyfor excessinterest,latefees,foreclosure fees,and/oranyotherimproper amounts,andcorrectcreditreports.

Pay$2,000.

$2,000

$1,000

Pay$1,000.

$1,000

N/A

Remedydeficiencyforexcess interest.

N/A

OCC FRB Financial Remediation Framework

Independent Foreclosure Review
No. CATEGORY ERROR DESCRIPTION FORECLOSUREINPROCESS (ATTIMEOFREMEDIATION ) Remedy DollarPayment N/A FORECLOSURECOMPLETE (ATTIMEOFREMEDIATION ) Remedy Dollar Payment Remedydeficiencyforexcess N/A interest.

9 LoanModification Usedwrong interestrateinan approved modification 10 Bankruptcy Bankruptcy

Servicererrorresultedinloanmodification Correctservicerrecordforexcess withhigherinterestratethanborrower interestaccruedbyborrower. shouldhavebeenchargedunderHAMPor otherloanmodificationprogramdesignated byregulator. Servicerinitiatedforeclosureorforeclosed onborrowerwhowasprotectedbyfederal bankruptcylaw. Servicerinitiatedforeclosureorforeclosed onborrower,butlackedstandingto foreclose.

Remediationdeterminedonacasebycasebasisasbankruptcylawdictates.

11 NoStanding

Servicerdidnot havestandingto foreclose Servicerfailedto providelegally sufficientnotice

Remediationdeterminedonacasebycasebasisasstatelawdictates.

12 Notice

Servicerinitiatedforeclosureorforeclosed Remediationdeterminedonacasebycasebasisasstatelawdictates. onborrowerandeitherfailedtoprovideany noticeorlegallysufficientnoticeasrequired understatelaw. Casebycase Servicererroroccurredthatdidnotdirectly Suspendforeclosurewhere causeforeclosure,butdiddirectlyresultin appropriate,correctservicerrecord basis foramountsinerrorand/orreimburse financialinjurytoborrower. borrowerforamountspaidinerror, plusinterest;andwhererequired, correctcreditreportsandpay$500for creditreportingerror. Remedydeficiencyforamountsin Casebycase errorand/orreimburseborrowerfor basis amountspaidinerror,plusinterest; andwhererequired,correctcredit reportsandpay$500forcredit reportingerror.

13 General

Errorcaused financialinjury