FORECLOSURE 

REVIEW 

Opportunities Exist to 

Further Enhance 

Borrower Outreach 

Efforts 

Report to Congressional Requesters 

June 2012 

GAO-12-776 

United States Government Accountability Office

GAO 
United States Government Accountability Office

Highlights of GAO-12-776, a report to 

congressional requesters

June 2012

FORECLOSURE REVIEW

Opportunities Exist to Further Enhance Borrower 

Outreach Efforts 

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 thirdparty 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 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. 

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. 

View GAO-12-776. For more information, 

contact Lawrance L. Evans, Jr. at (202) 512-

8678 or evansl@gao.gov.
Page i GAO-12-776 Foreclosure Review

Letter 1 

Background 3

While the Outreach Efforts Have Improved over Time, 

Opportunities Exist to Enhance Readability and Content of the 

Communication Materials 9

Outreach Was Based on Limited Analysis of Eligible Borrower 

Subgroups 26

Conclusions 37

Recommendations for Executive Action 39

Agency Comments and Our Evaluation 40

Appendix I Objectives, Scope, and Methodology 44

Appendix II Comments from the Office of the Comptroller of the Currency 53

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

System 63

Appendix IV GAO Contact and Staff Acknowledgments 67

Table

Table 1: Results of Whole Website Readability Analysis 46

Figures

Figure 1: Timeline of Key Deadlines in the Foreclosure Review 

Process 5

Figure 2: Initial Foreclosure Review Communication Materials 8

Figure 3: Proportion of the Adult Population with Limited English 

Proficiency, 2008-2010, and Key Markets Targeted by 

Servicers with Spanish-Language Advertising 15

Figure 4: Remediation Information in Initial Foreclosure Review 

and Sample Class Action Lawsuit Materials 22

Contents
Page ii GAO-12-776 Foreclosure Review

Figure 5: Estimated Rates of Active Nonprime Loans in the 

Foreclosure Process by Congressional District, as of June 

30, 2009 29

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

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately.
Page 1 GAO-12-776 Foreclosure Review

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.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.2

 

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.

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 

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. 

 
 

Page 2 GAO-12-776 Foreclosure Review

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.
 

Page 3 GAO-12-776 Foreclosure Review

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 customerservice 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.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.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.5

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 

 

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).

Background 

Regulators Issued Consent 

Orders to Mortgage 

Servicers
 

Page 4 GAO-12-776 Foreclosure Review

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 fig. 1).6

 

6

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

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 
 

Page 5 GAO-12-776 Foreclosure Review

exception of one institution, the Federal Reserve approved the 

engagement letters for servicers under its jurisdiction by February 2012.7

Figure 1: Timeline of Key Deadlines in 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 

 

7

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

The Foreclosure Review 

Process
 

Page 6 GAO-12-776 Foreclosure Review

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).

8

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.

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.

9

 

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. 

Acting Comptroller Walsh stated in a 

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.
 

Page 7 GAO-12-776 Foreclosure Review

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.

10

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.

Consultants 

are required to review all eligible requests for review submitted through 

the borrower outreach process.

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 fig. 2). The third-party administrator took steps to 

update addresses of the eligible borrowers who may have lost their 

homes to foreclosure.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.13

 

10Statement by John Walsh, Acting Comptroller of the Currency, before the 2012 National 

Interagency Community Reinvestment Conference, Seattle, Washington, March 26, 2012.

The original deadline 

11The 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. 

12Specifically, 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. 

13The website is: http://www.independentforeclosurereview.com.
 

Page 8 GAO-12-776 Foreclosure Review

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
 

Page 9 GAO-12-776 Foreclosure Review

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.

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 

While the Outreach 

Efforts Have 

Improved over Time, 

Opportunities Exist to 

Enhance Readability 

and Content of the 

Communication 

Materials

Communication Materials 

Could Impede Some 

Borrowers’ Ability to 

Respond 
 

Page 10 GAO-12-776 Foreclosure Review

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.14 We also have found that in order to develop clear

and consistent audience messages, testing and refining language are 

important.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.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.17

 

14See GAO, Credit Cards: Increased Complexity in Rates and Fees Heightens Need for 

More Effective Disclosures to Consumers,

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 

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.

15See GAO, Digital Television Transition: Increased Federal Planning and Risk 

Management Could Further Facilitate the DTV Transition, 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.

16The 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.

17Federal 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. 
 

Page 11 GAO-12-776 Foreclosure Review

on how well the document communicates information and identify any 

confusing language.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.19

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. 

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. 

 

18U.S. Securities and Exchange Commission, A Plain English Handbook: How to Create 

Clear SEC Disclosure Documents (Washington, D.C.: August 1998). 

19According to regulatory staff, the August 2011 deadline was extended when it became 

apparent that the coordinated approach would require additional time.
 

Page 12 GAO-12-776 Foreclosure Review

population indicated that nearly half of the adult population is estimated to 

read at or below the eighth-grade level.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.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.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.23

 

201992 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.

Certain 

sections of the website required higher or lower reading levels to be 

understandable. For example, the legal section of the online submission 

21See 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.

22Statement 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-forreview form at a 13.5 grade level. We did not validate these results.

23The 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.
 

Page 13 GAO-12-776 Foreclosure Review

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 
 

Page 14 GAO-12-776 Foreclosure Review

not well or not at all.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.25

 

24In 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. 

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.

25See GAO, Consumer Finance: Factors Affecting the Financial Literacy of Individuals 

with Limited English Proficiency, GAO-10-518 (Washington, D.C.: May 21, 2010).
 

Page 15 GAO-12-776 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

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.
 

Page 16 GAO-12-776 Foreclosure Review

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 nonEnglish 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.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.

 

27

 

26Regulatory 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. 

In addition, the Federal Reserve released a 

27The 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. 
 

Page 17 GAO-12-776 Foreclosure Review

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 requestfor-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.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.29

 

28See 

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 

GAO-10-518. 

29Brenda Muñiz, Financial Education in Latino Communities: An Analysis of Programs, 

Products, and Results/Effects, National Council of La Raza (Washington, D.C.: 2004).
 

Page 18 GAO-12-776 Foreclosure Review

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-forreview 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.

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 

Limited Remediation 

Information May Affect the 

Response Rate
 

Page 19 GAO-12-776 Foreclosure Review

a class action lawsuit notification. Regulatory staff and servicers informed 

us that they generally modeled the communication materials on class 

action lawsuit notifications.

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.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 (fig. 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 

 

30Our 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. 

31The 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. 
 

Page 20 GAO-12-776 Foreclosure Review

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.32

• 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.

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.

33

• 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

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. 

 

32The 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. 

33National Mortgage Settlement website is: http://www.nationalmortgagesettlement.com/. 
 

Page 21 GAO-12-776 Foreclosure Review

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.34

 

34See GAO, Troubled Asset Relief Program: Results of Housing Counselors Survey on 

Borrowers’ Experiences with the Home Affordable Modification Program, GAO-11-367R

(Washington, D.C.: May 26, 2011).
 

Page 22 GAO-12-776 Foreclosure Review

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

Page 23 GAO-12-776 Foreclosure Review

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.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 thirdparty consultants identifying types of injuries that may warrant 

remediation have been made publicly available, including in the testimony 

of an OCC official.36

 

35The 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. 

Further, OCC staff noted that the request-for-review 

36Remarks by John Walsh, Acting Comptroller of the Currency before the 2012 National 

Interagency Community Reinvestment Conference, Seattle, March 26, 2012.
 

Page 24 GAO-12-776 Foreclosure 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.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.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.”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.40

 

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

This testimony 

38Testimony by Suzanne G. Killian, Federal Reserve Board, Committee on Oversight and 

Government Reform, U.S. House of Representatives, on March 19, 2012. 

39Federal Reserve video: http://www.federalreserve.gov/consumerinfo/independentforeclosure-review.htm 

40Testimony 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.
 

Page 25 GAO-12-776 Foreclosure Review

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.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.

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.43

 

41Regulatory staff point out that these 22 examples of financial injury are demonstrative 

and more types of financial injury could exist. 

For example, the remarks state that 

remediation for financial injuries may include, but is not limited to, lumpsum payments, rescinded foreclosures, reimbursements of lost equity, 

repayment of out-of-pocket expenses resulting from the error plus 

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

43Remarks by John Walsh, Acting Comptroller of the Currency, before the 2012 National 

Interagency Community Reinvestment Conference, Seattle, March 26, 2012.
 

Page 26 GAO-12-776 Foreclosure Review

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.

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.

Regulators approved a uniform process to reach eligible borrowers, with 

additional targeted outreach limited to African-American and Spanishspeaking 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 

Outreach Was Based 

on Limited Analysis of 

Eligible Borrower 

Subgroups 

Initial Outreach Was 

Largely Uniform with 

Limited Targeted Outreach
 

Page 27 GAO-12-776 Foreclosure Review

publications.44

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, Spanishlanguage 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.

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.

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.46

 

44Servicers placed advertisements in Parade Magazine, USA Weekend, People 

Magazine, and TV Guide. 

Finally, 

OCC and the Federal Reserve directed servicers to increase outreach to 

African-American borrowers and servicers purchased advertisements in 

45According to Federal Reserve staff, the regulator had already planned to conduct some 

outreach in Spanish prior to meeting with community groups. 

46Since 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. 
 

Page 28 GAO-12-776 Foreclosure Review

one additional national print publication that primarily targets the AfricanAmerican community.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.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.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.50

 

47Servicers purchased advertisements in Jet magazine.

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.

48See GAO-08-43. 

49See GAO, Loan Performance and Negative Home Equity in the Nonprime Mortgage 

Market, GAO-10-146R (Washington, D.C.: Dec. 16, 2009).

50In March 2009, Congress appropriated $6 million to NeighborWorks America to develop 

a national public education campaign about loan modification scams.
 

Page 29 GAO-12-776 Foreclosure Review

Figure 5: Estimated Rates of Active Nonprime Loans in the Foreclosure Process by 

Congressional District, as of June 30, 2009

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. 

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.51

 

51See GAO, Credit Reporting Literacy: Consumers Understood the Basics but Could 

Benefit from Targeted Educational Efforts, 

Research has found that borrowers with some of these 

characteristics—such as low-income—were more likely to be in default 

GAO-05-223 (Washington, D.C.: Mar. 16, 

2005) and 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).
 

Page 30 GAO-12-776 Foreclosure Review

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.

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 2010.53

 

52See 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).

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 

53As discussed earlier, in the Census Bureau data, English speaking ability is selfreported 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.
 

Page 31 GAO-12-776 Foreclosure Review

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.54

 

54See GAO, Standards for Internal Control in the Federal Government,

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 

GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999).
 

Page 32 GAO-12-776 Foreclosure Review

target certain groups and support a fair opportunity to request a 

foreclosure review.

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.55

 

55See 

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 

GAO-08-43. 

Servicers Used Credible 

Messengers in Their 

Coordinated Outreach to 

Varying Degrees
 

Page 33 GAO-12-776 Foreclosure Review

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 moderateincome 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.56

 

56In 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.

According to 

community group representatives, some groups have initiated their own 

outreach about the foreclosure review process, but these efforts have 
 

Page 34 GAO-12-776 Foreclosure Review

been limited by the availability of funding.57

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.

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.

58

 

57The 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. 

These 

activities were designed to increase awareness about the foreclosure 

review process and to assist borrowers in completing the request-forreview 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 

58According 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. 
 

Page 35 GAO-12-776 Foreclosure Review

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.

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.

Regulators Monitored 

Status of Initial Outreach 

but Did Not Analyze 

Characteristics of 

Nonrespondents 
 

Page 36 GAO-12-776 Foreclosure Review

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.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.60

 

59In 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.

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 

60See GAO, Internal Control Management and Evaluation Tool, GAO-01-1008G

(Washington, D.C.: August 2001).
 

Page 37 GAO-12-776 Foreclosure Review

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.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.

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 

 

61As 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 foreclosurerelated 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.

Conclusions 
 

Page 38 GAO-12-776 Foreclosure Review

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 AfricanAmerican 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 
 

Page 39 GAO-12-776 Foreclosure Review

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.

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.

Recommendations for 

Executive Action
 

Page 40 GAO-12-776 Foreclosure Review

• 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.

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 

Agency Comments 

and Our Evaluation
 

Page 41 GAO-12-776 Foreclosure Review

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. 

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to interested congressional 

committees, the Board of Governors of the Federal Reserve System, 

Office of the Comptroller of the Currency, and other interested parties. In 

addition, the report will be available at no charge on the GAO Web site at 

http://www.gao.gov. 
 

Page 42 GAO-12-776 Foreclosure Review

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,

Lawrance L. Evans, Jr.

Acting Director, Financial Markets

and Community Investment
 

Page 43 GAO-12-776 Foreclosure Review

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
Appendix I: Objectives, Scope, and 

Methodology

Page 44 GAO-12-776 Foreclosure Review

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.

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, requestfor-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.1

 

1

See 

The experts were 

GAO-08-43. 

Appendix I: Objectives, Scope, and 

Methodology 

Development and Content 

of Communication 

Materials
Appendix I: Objectives, Scope, and 

Methodology

Page 45 GAO-12-776 Foreclosure Review

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.2

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).

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.

3

 

2

See 

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 

GAO-06-929. 

3

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.
Appendix I: Objectives, Scope, and 

Methodology

Page 46 GAO-12-776 Foreclosure Review

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 Spanishlanguage 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

Predicted grade level required

to understand text

Flesch-Kincaid grade level 11

FOG 10

SMOG 13

Average 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.

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.4

 

4

See 

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 

GAO-10-518. 
Appendix I: Objectives, Scope, and 

Methodology

Page 47 GAO-12-776 Foreclosure Review

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.5

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.6

 

5

See 

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 

GAO-10-518. 

6

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. 
Appendix I: Objectives, Scope, and 

Methodology

Page 48 GAO-12-776 Foreclosure Review

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.

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, 

Planning and Evaluation of 

the Outreach and 

Advertising Approach
Appendix I: Objectives, Scope, and 

Methodology

Page 49 GAO-12-776 Foreclosure Review

identifying credible messengers, and evaluating outreach activities 

identified in our prior work.7 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.8 Finally, we considered our internal control 

standards on managing risk and other control activities.9

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.

 

10

 

7

See 

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 

GAO-08-43. 

8

See GAO, Program Evaluation: Strategies for Assessing How Information Dissemination 

Contributes to Agency Goals, GAO-02-923 (Washington, D.C.: Sept. 30, 2002).

9

See GAO/AIMD-00-21.3.1 and GAO-01-1008G. 

10See GAO-10-146R. LoanPerformance is a unit of First American CoreLogic, 

Incorporated. 
Appendix I: Objectives, Scope, and 

Methodology

Page 50 GAO-12-776 Foreclosure Review

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.11 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.12

 

11For additional discussion of the results and methodology, see 

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 

GAO-05-223. 

12For a discussion of the results of the forum, see GAO-12-299SP. 
Appendix I: Objectives, Scope, and 

Methodology

Page 51 GAO-12-776 Foreclosure Review

challenges faced by speakers of limited English (discussed earlier).13 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.

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 tollfree 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 

 

13See GAO-10-518. 

Interviews with Regulatory 

Staff and Stakeholders
Appendix I: Objectives, Scope, and 

Methodology

Page 52 GAO-12-776 Foreclosure Review

Department of the Treasury’s Home Affordable Modification 

Program.14

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.

 

14See GAO-11-367R. 
Appendix II: Comments from the Office of the 

Comptroller of the Currency

Page 53 GAO-12-776 Foreclosure Review

Appendix II: Comments from the Office of 

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

Comptroller of the Currency

Page 54 GAO-12-776 Foreclosure Review
Appendix II: Comments from the Office of the 

Comptroller of the Currency

Page 55 GAO-12-776 Foreclosure Review
Appendix II: Comments from the Office of the 

Comptroller of the Currency

Page 56 GAO-12-776 Foreclosure Review
Appendix II: Comments from the Office of the 

Comptroller of the Currency

Page 57 GAO-12-776 Foreclosure Review
Appendix II: Comments from the Office of the 

Comptroller of the Currency

Page 58 GAO-12-776 Foreclosure Review
Appendix II: Comments from the Office of the 

Comptroller of the Currency

Page 59 GAO-12-776 Foreclosure Review
Appendix II: Comments from the Office of the 

Comptroller of the Currency

Page 60 GAO-12-776 Foreclosure Review
Appendix II: Comments from the Office of the 

Comptroller of the Currency

Page 61 GAO-12-776 Foreclosure Review
Appendix II: Comments from the Office of the 

Comptroller of the Currency

Page 62 GAO-12-776 Foreclosure Review
Appendix III: Comments from the Board of 

Governors of the Federal Reserve System

Page 63 GAO-12-776 Foreclosure Review

Appendix III: Comments from the Board of 

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

Governors of the Federal Reserve System

Page 64 GAO-12-776 Foreclosure Review
Appendix III: Comments from the Board of 

Governors of the Federal Reserve System

Page 65 GAO-12-776 Foreclosure Review
Appendix III: Comments from the Board of 

Governors of the Federal Reserve System

Page 66 GAO-12-776 Foreclosure Review
Appendix IV: GAO Contact and Staff 

Acknowledgments

Page 67 GAO-12-776 Foreclosure Review

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

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.

Appendix IV: GAO Contact and Staff 

Acknowledgments 

GAO Contact 

Staff 

Acknowledgments 

(250661)
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