FORECLOSURE REVIEW

Lessons Learned Could 

Enhance Continuing 

Reviews and Activities 

under Amended Consent 

Orders

Statement of Lawrance L. Evans, Jr., Director 

Financial Markets and Community Investment

Testimony 

Before the Subcommittee on Housing, 

Transportation, and Community 

Development, Committee on Banking, 

Housing, and Urban Affairs, U.S. Senate

For Release on Delivery 

Expected at 10 a.m. EDT

Wednesday, April 17, 2013

GAO-13-550T

United States Government Accountability Office

GAO
 

Page 1 GAO-13-550T 

Chairman Menendez, Ranking Member Moran, and Members of the 

Subcommittee:

I am pleased to be here today to discuss the Independent Foreclosure 

Review process. 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) issued 

consent orders against 14 mortgage servicers. These orders required the 

servicers to engage third-party consultants to review servicers’ loan files 

to identify borrowers who had suffered financial harm due to errors, 

misrepresentations, or other deficiencies in foreclosure processing and 

recommend remediation for the harms these borrowers suffered.1

Roughly 4.3 million borrowers who were in some stage of foreclosure in 

2009 and 2010 were eligible for the foreclosure review.2

 

1

The 14 servicers that entered into consent orders with OCC, OTS, and/or Federal 

Reserve were Ally Financial, Inc.; Aurora Bank, FSB; Bank of America, N.A.; Citibank, 

N.A.; EverBank Financial Corp.; HSBC Bank USA, N.A.; JPMorgan Chase, N.A.; Metlife 

Bank, N.A.; OneWest Bank, FSB; PNC Bank, N.A.; Sovereign Bank; SunTrust Bank, Inc.; 

U.S. Bank, N.A.; and Wells Fargo Bank, N.A. and their affiliates or acquired loan servicing 

companies. The Federal Deposit Insurance Corporation (FDIC) was also a party to the 

Federal Reserve’s order with Ally Financial (GMAC Mortgage). The Dodd-Frank Wall 

Street Reform and Consumer Protection Act, Pub. L. No. 111-203, §§ 311-313, 124 Stat. 

1376, 1520-1523 (2010), eliminated OTS and transferred its regulatory responsibilities to 

OCC, FDIC, and the Federal Reserve. The transfer of these powers was completed on 

July 21, 2011, and OTS was officially dissolved 90 days later (Oct. 19, 2011).

As of December 

2012, consultants had more than 800,000 loans slated for review. In 

January 2013, the regulators announced agreements that led to amended 

consent orders with 11 of the 14 servicers to discontinue foreclosure 

reviews and replace the reviews with a compensation framework that 

does not rely on determinations of whether borrowers suffered financial

2

Borrowers were eligible to be included in the foreclosure review and have their loan files 

reviewed for errors if foreclosure actions took place on their primary residences between 

January 1, 2009 and December 31, 2010, by one of the participating servicers.

 
 

Page 2 GAO-13-550T 

harm.3 The remaining 3 servicers, covering 450,000 borrowers (10 

percent), are continuing with the foreclosure review work.4

My remarks today are based on our March 2013 report on the 

implementation of the foreclosure review and lessons learned that can be 

applied to the activities required by the amended consent orders and 

ongoing foreclosure reviews.5

In summary, we found the following:

My statement addresses (1) challenges to 

the achievement of the goals of the foreclosure review, (2) the extent of 

transparency in the foreclosure review process, and (3) lessons that could 

be useful for the activities under the amended consent orders and

continuing reviews. As noted in our report, we were in the process of 

reviewing other aspects of the foreclosure review when OCC and the 

Federal Reserve announced the agreements. Neither our report nor this 

statement assesses the regulators’ rationale for accepting the 

agreements nor any trade-offs involved in the regulators’ choice to amend 

the consent orders with the servicers.

• Regulators’ ability to achieve the goals of the foreclosure review was 

affected by the complexity of the reviews, as well as by overly broad 

 

3

OCC and the Federal Reserve announced on January 7, 2013, that they had reached 

agreements with 10 mortgage servicers. Those servicers are Aurora, Bank of America, 

Citibank, JPMorgan Chase, MetLife Bank, PNC, Sovereign, SunTrust, U.S. Bank, and 

Wells Fargo. On January 18, 2013, OCC and Federal Reserve announced that an 

agreement had been reached with HSBC. While not part of the original consent orders 

issued in April 2011, two additional institutions, Goldman Sachs (Litton Loan Servicing, 

LP) and Morgan Stanley (Saxon Mortgage Services, Inc.), also entered into consent 

orders with the Federal Reserve in 2012 that required a foreclosure review for deficient 

practices in mortgage loan servicing and foreclosure processing. The Federal Reserve 

announced on January 16, 2013, that it had reached agreements with these two servicers. 

Collectively, these 13 servicers are identified as the participating servicers in the 

agreements; however, Goldman Sachs and Morgan Stanley were outside the scope of our 

study because they were not part of the original 2011 consent orders. 

4

The servicers not participating in the agreements are Ally Financial (GMAC Mortgage), 

EverBank, and OneWest.

5

GAO, Foreclosure Review: Lessons Learned Could Enhance Continuing Reviews and 

Activities Under the Amended Consent Orders, GAO-13-277 (Washington, D.C.: Mar. 26, 

2013). This report represents the second phase of our examination of the foreclosure 

review process. In a previous report, we reviewed servicers’ outreach efforts to inform

borrowers of the foreclosure review; see GAO, Foreclosure Review: Opportunities Exist to 

Further Enhance Borrower Outreach Efforts, GAO-12-776 (Washington, D.C.: June 29, 

2012).
 

Page 3 GAO-13-550T 

regulator-issued guidance and limited monitoring for the consistency 

and sufficiency of consultants’ review activities. For example, 

regulators’ statistical sampling approach did not include mechanisms 

to allow the regulators to monitor consultants’ progress toward finding 

as many harmed borrowers as possible. Our prior work has identified 

practices, such as assessing progress toward goals and designing 

monitoring during the planning stage of a project, as effective

management practices.

6 In addition, the Office of Management and 

Budget (OMB) has found that in planning data analysis activities, such 

as sampling, agencies should take necessary steps to ensure that 

they have collected the appropriate data from which to draw 

conclusions.7

• Although regulators publicly released more information on the 

foreclosure review process than is typically disclosed in connection 

with a consent order, the absence of timely and useful communication 

to the general public and individual borrowers at certain stages of the 

process impacted transparency and public confidence. To promote 

transparency, OCC and the Federal Reserve released redacted 

engagement letters between servicers and consultants, among other 

documents. However, some stakeholders felt there were gaps in the 

publicly released information, including the lack of detailed information 

on how the reviews were to be carried out. In addition, although 

borrowers who requested reviews under the foreclosure review 

process received an acknowledgement letter, some borrowers did not 

receive updates on their request for almost a year after the program 

was launched.

Without using objective measures to compare review 

methods or assess sampling among consultants, regulators’ ability to 

monitor progress toward achievement of foreclosure review goals was 

hindered.

 

6

See GAO, Agency Performance Plans: Examples of Practices that Can Improve 

Usefulness to Decisionmakers, GAO/GGD/AIMD-99-69 (Washington, D.C.: Feb. 26, 1999) 

and Executive Guide: Effectively Implementing the Government Performance and Results 

Act, GAO/GGD-96-118 (Washington, D.C.: June 1996). These reports identify and 

describe practices to improve the usefulness of agencies’ annual performance plans and 

successfully implement results-oriented-management initiatives.

7

OMB, Standards and Guidelines for Statistical Surveys (Washington, D.C.: September 

2006). This document provides 20 standards that apply to work with the statistical 

purposes of describing, estimating, or analyzing the characteristics of groups, segments, 

activities, or geographic areas.
 

Page 4 GAO-13-550T 

• The foreclosure review experience revealed lessons related to 

planning, monitoring, and communication that could help inform 

regulators’ implementation of the amended consent orders and the 

remaining foreclosure reviews. In our prior work, we found that 

assessing lessons learned from previous experiences, such as 

through discussions with key participants and stakeholders, and 

applying these lessons can help strengthen future activities.8 Without 

assessing and applying relevant lessons learned, regulators might not 

address similar challenges in activities under the amended consent 

orders or in the continuing reviews. In particular, regulators 

announced the agreements that led to the amended consent orders 

without a clear communication strategy, including determining what 

information to provide to borrowers. GAO’s internal control standards 

and our work related to best practices indicate that an effective 

communication strategy and timely reporting can enhance 

transparency and public confidence.9

Based on our findings, we recommended that OCC and the Federal 

Reserve improve oversight of sampling and consistency in the continuing 

reviews; apply lessons in planning and monitoring, as appropriate, to the 

activities of the amended consent orders and continuing reviews; and 

implement a communication strategy to keep stakeholders informed. The 

regulators agreed to take steps to implement these recommendations.

Absent a clear strategy to guide 

regular communications with individual borrowers and the general 

public, regulators face risks to transparency and public confidence 

similar to those experienced in the foreclosure review.

For our March 2013 report, on which this testimony is based, we analyzed 

consultants’ sampling plans; reviewed relevant documents from 

 

8

GAO, Federal Real Property Security: Interagency Security Committee Should 

Implement a Lessons-Learned Process, GAO-12-901 (Washington, D.C.: Sept. 10, 2012) 

and NASA: Better Mechanisms Needed for Sharing Lessons-Learned, GAO-02-195 

(Washington, D.C.: Jan. 30, 2002).

9

See GAO, Standards for Internal Controls, GAO/AIMD-00-21.3.1 (Washington, D.C.: 

November 1999), Troubled Asset Relief Program: One Year Later, Actions Are Needed to 

Address Remaining Transparency and Accountability Challenges, GAO-10-16 

(Washington, D.C.: Oct. 8, 2009); Troubled Asset Relief Program: Additional Actions 

Needed to Better Ensure Integrity, Accountability, and Transparency, GAO-09-161 

(Washington, D.C.: Dec. 2, 2008); Troubled Asset Relief Program: Status of Efforts to 

Address Transparency and Accountability Issues, GAO-09-539T (Washington, D.C.: Mar. 

31, 2009); and Troubled Asset Relief Program: June 2009 Status of Efforts to Address 

Transparency and Accountability Issues, GAO-09-658 (Washington, D.C.: June 17, 2009). 
 

Page 5 GAO-13-550T 

regulators, such as regulator-issued guidance to third-party consultants, 

law firms, and local examination teams, describing steps taken to foster 

consistency; reviewed regulators’ communication materials; and 

interviewed five consultant teams, regulator staff, and consumer groups. 

We then compared this information and these parties’ actions to criteria, 

such as the regulators’ standard practices and policies, regulators’ goals 

for the reviews, and our previous work. For those third-party consultants 

we did not interview, we obtained written information from them to 

address our objectives. We conducted the performance audit on which 

this statement is based from July 2012 through March 2013 in 

accordance with generally accepted government auditing standards. 

In September 2010, allegations surfaced that several servicers’ 

documents accompanying judicial foreclosures may have been 

inappropriately signed or notarized.10 In response to this and other 

servicing issues, federal banking regulators conducted a coordinated onsite review of 14 of the largest mortgage servicers to evaluate the 

adequacy of the controls over servicers’ foreclosure processes and 

assess servicers’ policies and procedures for compliance with applicable 

federal and state laws. On the basis of their findings, the regulators 

issued the April 2011 consent orders against these servicers that required 

the servicers to conduct the foreclosure review, among other things.11

 

10This practice, which includes bank employees or contractors automatically signing 

foreclosure documents without verifying the details contained in the paperwork or the 

validity of the accompanying affidavits, became widely known as “robo-signing.” Failure to 

review documents filed in connection with a judicial foreclosure may violate consumer 

protection and foreclosure laws, which vary by state and which establish certain 

procedures that mortgage servicers must follow when conducting foreclosures.

In 

January 2013, OCC and the Federal Reserve reached agreements with 

11 of the 14 mortgage servicing companies subject to the April 2011 

consent orders to discontinue the foreclosure reviews and to provide 

approximately $3.4 billion in direct payments to eligible borrowers. These 

agreements were formalized in amended consent orders that the 

regulators released in late February 2013. As shown in table 1, with this 

change from the foreclosure review to an agreed-upon payment process, 

regulators and servicers shifted from identifying the types and extent of 

11The foreclosure review process had two components: a process for eligible borrowers to 

request a review of their particular circumstances (referred to as the borrower outreach 

process) and a review of categories of files (referred to as the look-back review).

Background 
 

Page 6 GAO-13-550T 

harm borrowers may have experienced to instead focus on assigning all 

eligible borrowers into categories based on objective criteria. In addition, 

under the amended consent orders, the servicers also will provide 

approximately $5.4 billion in foreclosure prevention assistance to 

borrowers, such as loan modifications. Consultants for the servicers that 

did not reach agreements with the regulators continue their foreclosure 

review activities.

Table 1: Comparison of Borrower Payment Determinations between the Foreclosure Review and Amended Consent Orders

Foreclosure review Amended consent orders

Purpose of payment Remediate borrowers who suffered financial 

harm as a result of servicer errors, 

misrepresentations, or other deficiencies

Provide cash payments to all eligible borrowers

a

Borrowers assessed Sample of eligible borrowers plus all borrowers 

in certain categories, including borrowers who 

submitted a request-for-review

All eligible borrowers

b

Categorization process Consultant reviews loan files for errors and 

categorizes borrowers 

Servicer reviews information in their systems 

and categorizes borrowersc

Categorization criteria 

 

Type of financial harm resulting from identified 

servicer error 

Borrower and loan characteristics

Payment categories Borrowers may be eligible for payment in 

multiple categories of harm

Borrowers eligible for payment in one category 

Source: GAO analysis of OCC and Federal Reserve information.

a

In addition to direct payments, borrowers who suffered financial harm may receive other types of remediation, such as correction of 

credit reports or, when possible, rescission of the foreclosure. 

b

Regulators expressly allowed third-party consultants to use sampling. Regulator staff told us that if third-party consultants’ initial 

analyses of sampled loans identified errors, consultants were expected to use this analysis as the basis for a second sampling phase. 

c

In most cases, servicers, with regulators’ approval, engaged the third-party consultants to review borrowers’ files in two categories 

(Servicemembers Civil Relief Act and foreclosed borrowers who were not in default) to determine whether borrowers experienced those 

specific types of harm.

Complexity of the file reviews, overly broad guidance, and limited 

monitoring for consistency may have impeded the ability of OCC and the 

Federal Reserve to achieve the goals of the foreclosure review. These 

goals were to ensure similar results for similarly situated borrowers, 

identify as many harmed borrowers as possible, and restore public 

confidence in the mortgage market. According to regulator staff and thirdparty consultants, coordinating the foreclosure review process was 

challenging because of the large number of actors and borrowers eligible 

for review, the size of the loan files, and the scope of the file reviews. In 

addition, each servicer had a unique process for recording and storing 

information on borrowers’ loan files, which made defining review 

parameters and developing a uniform review structure that was 

appropriate for all consultants challenging.

Complexities of the 

Foreclosure Review 

Process and 

Limitations in 

Regulators’ Guidance 

and Monitoring May 

Have Hindered 

Achievement of Goals
 

Page 7 GAO-13-550T 

Regulators took a number of oversight steps to address the complexities 

and challenges, including issuing nearly identical sections of the consent 

orders outlining the purpose of the foreclosure reviews, providing thirdparty consultants with guidance to help frame the file review process, and 

implementing regular communication mechanisms among the key actors 

to help foster consistency in the reviews. However, broad guidance and 

limited monitoring for consistency reduced the potential usefulness of 

information being collected and increased risks of inconsistency. 

According to third-party consultants, regulators’ guidance did not address 

certain aspects of the foreclosure review, and consultants had to use 

additional judgment and interpretation when applying certain guidance, 

increasing the risk of inconsistency among review results. Third-party 

consultants and their respective law firms we interviewed said that they 

each developed their own test questions based on analyses of state 

foreclosure laws, loan modification guidelines, and bank policies, among 

other references.12

Regulators took steps to monitor potential inconsistencies among the 

reviews, but these steps were limited and likely would have resulted in 

delays in providing remediation to borrowers. Our prior work has identified 

using intermediate activities or measures to assess progress toward 

intended results as an effective management practice to understand the 

extent to which activities are on track to reach stated goals.

According to OCC staff, the state law references were 

fairly straightforward and they had confidence that the consultants and 

law firms would provide fairly consistent interpretations. However, 

according to third-party consultants and law firms we interviewed, 

compiling these references and using them to develop review questions 

was challenging and time consuming and, in some cases, required 

judgment or interpretation of the laws or guidelines.

13

 

12To assess each of the review areas, consultants developed a series of test questions—

generally yes or no questions—to identify potential errors.

We have 

found that such activities can help management target areas that need 

improvement and select appropriate methodologies to realize that 

improvement. OCC and Federal Reserve staff said they had planned to 

assess the extent of inconsistencies affecting the outcomes for borrowers 

across the reviews after the reviews and recommendations for 

remediation were completed. However, conducting such an assessment 

after the completion of the reviews could have resulted in consultants 

13See GAO/GGD/AIMD-99-69 and GAO/GGD-96-118. 
 

Page 8 GAO-13-550T 

needing to re-do file reviews, which would have led to delays in 

remediation.

Other guidance issued by regulators did not specify key sampling 

parameters for the file reviews, and regulators lacked objective monitoring 

measures, resulting in difficulty assessing the extent of borrower harm. 

For example, our analysis of the May 2011 guidance on sampling found 

that the guidance was ambiguous about a key sampling parameter that 

resulted in variations in sample sizes used by the consultants and led 

consultants to use different triggers to determine when to conduct 

additional analysis. This ambiguity could have produced inconsistent 

results for similarly situated borrowers. According to OCC staff, they 

recognized that some consultants had not fully implemented the sampling 

approach as expected, and OCC is taking steps to address these 

differences for one of the servicers continuing the foreclosure review. In 

addition, our analysis found that the May 2011 guidance did not include a 

discussion of regulators’ expectations for reporting on sampling, and 

variations among the sampling plans would have limited the types of 

information that regulators could report.

Finally, the regulators’ sampling approach did not include key oversight 

mechanisms to facilitate assessment of whether consultants’ reviews 

were sufficient to realize the goal of identifying as many harmed 

borrowers as possible, except in those cases where there were few or no 

errors. The OMB standards for statistical surveys state that where 

sampling is used, it should include protocols to monitor activities and 

provide information on the quality of the analyzed data.14 Good planning 

and objective data collection provide a basis for making sound 

conclusions. In the absence of objective measures to compare review 

methods among consultants or assess sampling, regulators did not have 

an early warning mechanism to help identify problem areas that may have 

hindered achievement of the foreclosure review goals.

 

14OMB, Standards and Guidelines for Statistical Surveys, September 2006. 
 

Page 9 GAO-13-550T 

OCC and the Federal Reserve acknowledged the importance of 

transparency in the foreclosure review process and publicly released 

more information than is typically disclosed in connection with a consent 

order.15

Some stakeholders perceived gaps in key information about how the file 

reviews were being conducted. Regulators did not release any additional 

guidance documents, nor did they publicly disclose consultants’ test 

questions. To increase the transparency and credibility of the foreclosure 

review, consumer groups recommended that regulators release such 

information. According to consumer groups, without such information, the 

public would have questions and doubts about how the reviews were 

being executed. OCC and the Federal Reserve staff said that they 

considered releasing additional guidance to the public, but both 

expressed concerns that releasing detailed information risked disclosure 

of confidential or proprietary information. Moreover, test questions 

developed by consultants were numerous and complex, and Federal 

Reserve staff stated that review processes were too dissimilar to provide 

a comprehensive summary.

For example, regulators released redacted engagement letters 

between servicers and third-party consultants and the remediation 

framework for consultants to use that provided examples of situations in 

which compensation or other remediation is required for financial injury 

due to servicer errors, misrepresentations, or other deficiencies.

However, the absence of useful and timely communications at certain 

stages of the process—for the general public as well as individual 

borrowers—hindered transparency and public confidence in the 

processes and results.

Borrowers who requested reviews under the foreclosure review process 

initially received limited information about the status of their individual file 

review. Borrowers received a letter acknowledging their request was 

 

15By law, federal banking regulators must disclose any formal enforcement actions 

entered into under the Federal Deposit Insurance Act. See 12 U.S.C. §1818(u). On a 

case-by-case basis, banking regulators may consider the release of information beyond 

the mandatory disclosures. The Freedom of Information Act (FOIA), 5 U.S.C. § 552, 

generally provides that any person has a right of access to federal agency records, unless 

the records, or any portion thereof, are protected from disclosure by one of FOIA’s nine 

exemptions. Records pertaining to the supervision of financial institutions are subject to 

one of FOIA’s exemptions. 5 U.S.C. § 552(b)(8). Despite that exemption, regulators may 

exercise discretionary disclosure authority under 12 C.F.R. § 4.12(c) and 12 C.F.R. § 

261.14(c) for OCC and the Federal Reserve, respectively, to release records concerning 

financial institution supervision.

Limited 

Communication 

Hindered 

Transparency for 

Individual Borrowers 

and the General 

Public
 

Page 10 GAO-13-550T 

received, but some did not receive updates until almost a year after the 

outreach program was first launched, when they received a letter 

informing them of the continuing nature of the review. In letters to OCC 

and the Federal Reserve, consumer groups indicated that these 

borrowers were frustrated by the lack of information on their particular file 

review. Regulators indicated that additional status letters and information 

would be sent to borrowers with outstanding requests-for-review. 

However, regulators were still uncertain about specific information they 

would require servicers to share with both borrowers who would receive

remediation and those who would not. Regulators have acknowledged 

the importance of transparency, but after announcing the agreements that 

led to the amended consent orders, they had not yet determined what 

information to convey beyond that which was included in their press 

releases and public websites and whether additional information would be 

provided to borrowers who submitted a request-for-review.

During the foreclosure review process, OCC released two interim reports 

that provided the public with information on the organization and conduct 

of the file review process and preliminary results, such as the number of 

requests-for-review received, for institutions it supervises. These reports, 

according to OCC, were intended to build transparency into the process. 

The Federal Reserve did not issue interim reports on the foreclosure 

review process for institutions it supervised. According to Federal 

Reserve staff, they did not do so because their public release of servicers’ 

action plans provided sufficient information about how servicers were 

addressing the requirements of the consent orders and their public 

release of servicers’ engagement letters provided sufficient information 

about how the foreclosure review would be conducted. Prior to the 

announcement of the agreements that led to the amended consent orders 

and ended the foreclosure review for most servicers, OCC staff told us 

they had planned to release a final report on the results of the foreclosure 

review, and Federal Reserve staff indicated they expect to publish 

additional relevant information related to the foreclosure review and the 

agreements. However, as of February 2013, regulators had not decided 

what information on the work conducted under the foreclosure review 

prior to the agreements will be made available. 
 

Page 11 GAO-13-550T 

The foreclosure review revealed three key lessons related to planning, 

monitoring, and communication that could help inform regulators’ 

implementation of the amended consent orders and the continuing 

foreclosure reviews. These key lessons could help contribute to an 

effective process for distributing direct payments and other assistance as 

prescribed by the amended consent orders. Based on the foreclosure 

review experience, we found that (1) designing project features during the 

process’s initial stages influences the efficiency of file reviews, (2) 

monitoring progress helps ensure achievement of goals, and (3) 

promoting transparency enhances public confidence.

Our prior work shows that assessing and using lessons learned from 

previous experiences can provide a powerful method of ensuring that 

beneficial information is factored into the planning and work processes of 

future activities.16

The foreclosure review experience suggests that a planning process to 

determine key project features, such as guidance and necessary data 

elements, for activities conducted under the amended consent orders 

could lessen the risk of changes to planned activities, future delays, or 

rework. Our work on designing evaluations, including financial audits, has 

found that systematic and comprehensive planning enhances the quality, 

credibility, and usefulness of the results and contributes to a more 

effective use of time and resources.

Key practices of assessing lessons learned include 

collecting and analyzing information on prior activities and applying that 

information to future activities. Assessing lessons learned by using project 

critiques and discussions with key participants and stakeholders—such 

as local examination team staff, third-party consultants and law firms, and 

external groups—could identify the root causes of strengths and 

weaknesses of the foreclosure review that could apply to the amended 

consent order activities.

17

 

16See 

As regulators prepare to implement 

GAO-12-901 and GAO-02-195. In GAO-02-195, we established a lessons-learned 

process based, in part, on research done by the Naval Research Laboratory at the Navy 

Center for Applied Research in Artificial Intelligence. In GAO-12-901, we updated this 

work through a literature review and interviews with agencies.

17In assessing the foreclosure review process, we considered our prior work on program 

evaluations, government auditing standards, and financial auditing. See GAO, Designing 

Evaluations: 2012 Revisions, GAO-12-208G (Washington, D.C.: January 2012); 

Government Auditing Standards: 2011 Revision, GAO-12-331G (Washington, D.C.: 

December 2011); and GAO and President’s Council on Integrity and Efficiency, Financial 

Audit Manual: Volume 1, GAO-08-585G (Washington, D.C.: July 2008).

The Foreclosure 

Review Experience 

Could Offer Lessons 

for the Amended 

Consent Order 

Activities and 

Continuing Reviews
 

Page 12 GAO-13-550T 

the amended consent orders, they risk having to make changes in the 

planned activities or publicly announced timelines if they miss 

opportunities to make key project planning decisions, including issuing 

clear guidance.

The foreclosure review experience also suggests that using mechanisms 

to monitor the amended consent order activities and the continuing 

foreclosure reviews may help ensure achievement of goals. The 

regulators’ process for monitoring the activities of third-party consultants, 

servicers, and examination teams during the foreclosure review process 

could provide a useful model for monitoring activities under the amended 

consent orders. In addition, regulators’ experience with the foreclosure 

review suggests that identifying comparative oversight mechanisms to 

centrally promote consistency and monitor activities under the amended 

consent orders could help achieve consistent results for borrowers. 

GAO’s internal control standards state that agencies should take steps to 

comprehensively identify and analyze program operations to determine if 

risks exist to achieving goals—such as risks to the regulators’ goal of 

providing similar results for similarly situated borrowers.18 In our prior 

work, we found that using a horizontal review mechanism is an option to 

help mitigate risks of inconsistent results for activities conducted by 

multiple entities, such as multiple servicers.19

Finally, lessons from the foreclosure review activities conducted to date 

suggest that developing and implementing an effective communication 

strategy that includes public reporting goals could enhance the 

Using mechanisms to 

centrally monitor the consistency of servicers’ activities under the 

amended consent orders may lessen the risk of inconsistent results or 

delays in providing direct payments to borrowers. Similarly, monitoring 

potential inconsistencies for the servicers that are continuing the 

foreclosure reviews will provide regulators with information to assess 

whether there is a risk of those borrowers being treated inconsistently.

 

18See GAO/AIMD-00-21.3.1. 

19GAO, Opportunities Exist to Apply Lessons Learned from the Capital Purchase Program 

to Similarly Designed Programs and to Improve the Repayment Process, GAO-11-47 

(Washington, D.C.: Oct. 4, 2010). In our analysis of the U.S. Department of the Treasury’s 

oversight of the Capital Purchase Program under the Troubled Asset Relief Program, we 

found that Treasury’s practice of establishing centralized control mechanisms to help 

ensure consistency of activities conducted by multiple banking regulators helped lessen 

the likelihood of inconsistent results.
 

Page 13 GAO-13-550T 

transparency of the activities under the amended consent orders. GAO’s

internal control standards emphasize the importance of relevant, reliable, 

and timely communications both within an organization and with external 

stakeholders.20 In addition, our work on the Troubled Asset Relief 

Program (TARP) has underscored the importance of a communication 

strategy to strengthen communication with external stakeholders and 

improve transparency and accountability.21 Experiences with current 

government initiatives that are aimed at assisting struggling homeowners 

and involve institutions and mortgage-related issues similar to those of 

the foreclosure review highlight the benefits of regular performance 

reporting. Specifically, periodic reports on the performance of and 

participation in TARP programs and scheduled reports on servicers’ 

compliance with requirements of the National Mortgage Settlement are 

intended to promote transparency and build public confidence.22

Regulators announced the agreements that led to the amended consent 

orders without a clear communication strategy. As a result, what 

information will be provided to individual borrowers and the general public 

Like 

TARP and the National Mortgage Settlement, the foreclosure review and 

the subsequent activities under the amended consent orders are part of 

the larger governmental response to the housing and mortgage crises. As 

a result, a communication strategy which incorporates plans for periodic 

public reporting may enhance transparency in the distribution of direct 

payments and other assistance and help restore confidence in mortgage 

markets.

 

20See GAO/AIMD-00-21.3.1.

21We have made a series of recommendations aimed at improving the transparency of 

TARP by ensuring that Treasury develops a comprehensive communication strategy. 

TARP, like the foreclosure review and subsequent activities under the amended consent 

orders, is one of many activities the federal government has put in place to respond to the 

financial crisis, including the crises in the housing and mortgage markets. As such, we 

believe that similar efforts to improve communication will enhance the transparency in the 

implementation of the amended consent orders and continuing foreclosure reviews. See 

GAO-10-16, GAO-09-161, GAO-09-539T, and GAO-09-658. 

22The National Mortgage Settlement is the result of an agreement reached in February 

2012 by the country’s five largest mortgage servicers with the Departments of Justice, 

Treasury, and Housing and Urban Development and 49 state attorneys general. Under the 

terms of the settlement, Ally Financial (GMAC Mortgage), Bank of America, Citibank, 

JPMorgan Chase, and Wells Fargo will provide approximately $25 billion in relief to 

distressed borrowers in states that signed on to the settlement as well as direct payments 

to participating states and the federal government. United States v. Bank of America 

Corp., No. 1:12-CV-00361 (D.D.C. Apr. 4, 2012).
 

Page 14 GAO-13-550T 

about processes, progress, and results of activities under the amended 

consent orders is unclear. OCC and the Federal Reserve have provided 

some information on the amended consent orders, and planned to 

release additional information, such as details on payment categories that 

were publicly released in April 2013. However, we found that as of March 

2013, regulators had not made key decisions on communicating directly 

with individual borrowers and the extent to which they would report on 

activities related to the amended consent orders and continuing 

foreclosure reviews. While the amended consent orders terminate the 

foreclosure review for most of the servicers, transparency of past and 

current efforts continues to be important to stakeholders, including 

Congress and consumer groups. In the absence of a clear 

communication strategy to direct external communications, including 

public reporting and direct communication with individual borrowers, 

regulators face risks to transparency and public confidence similar to 

those experienced in the foreclosure review process.

In our March 2013 report, we recommended that OCC and the Federal 

Reserve improve oversight of sampling and identify and apply lessons 

from the foreclosure review process, such as enhancing planning and 

monitoring activities, to better ensure that the goals of the foreclosure 

review and amended consent orders are realized. In addition, to better 

ensure transparency, we recommended that OCC and the Federal 

Reserve develop and implement a communication strategy to regularly 

inform borrowers and the public. In commenting on the report, OCC and 

the Federal Reserve both identified actions that they have taken or 

planned to take to implement the recommendations.

Chairman Menendez, Ranking Member Moran, and Members of the 

Subcommittee, this concludes my prepared statement. I would be happy 

to answer any questions that you may have at this time.

If you or your staff have any questions about this testimony, please 

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

Contact points for our Offices of Public Affairs and Congressional 

Relations may be found on the last page of this statement. Other staff 

who made key contributions to this testimony include: John Karikari; Jill 

Naamane; Anna Maria Ortiz; Karen Tremba (Assistant Directors); 

Bethany M. Benitez; Charlene J. Lindsay; Patricia MacWilliams; Marc 

Molino; Robert Rieke; Jennifer Schwartz; Andrew Stavisky; Sonya 

Vartivarian; James Vitarello; and Monique Williams.

Contact and Staff 

Acknowledgments 

(250732)
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