##ing the errors. cost associated with foreclosure documentation problems, including “ robo - signing ” ( discussed in more detail later ), are not the only potential liabilities facing financial institutions. investors in mortgage - backed securities and purchasers of unsecuritized “ whole loans ” have begun to explore and in some cases assert contractual and securities law claims against the parties that originated the loans, sold the loans, underwrote securities offerings, or had other roles in the process. the essence of these claims is that the mortgages in the securitization pools or that had been sold as unsecuritized whole loans did not conform to the representations made about their quality – specifically, that the loan applications contained misrepresentations or the underwriting was not in conformance with stated underwriting guidelines. with respect to the contract claims, this potential liability is usually called “ put back ” risk, because many of the relevant agreements permit the buyer of the loans to put the loans back to the seller ( or other party that makes representations ). that is, the buyers can demand that the seller repurchase the loans at par if defects are found in the loan underwriting contrary to representations and warranties in the pooling and servicing agreement that created the securitization trust or the whole loan mortgage purchasing agreement. at the time of the putback, the loan has usually gone into default, sparking a review of the original loan application file. the defaulted loan, given current market conditions, is typically worth substantially less than par, thus the put - back transfers any potential loss from the buyer back to the seller. although the representations and warranties in the various agreements vary considerably, they frequently require that the defect materially and adversely affect the value of the loan before put - back rights can be exercised. there are also pending claims by some that underwriters and sponsors of securitizations failed to comply with the federal securities laws covering offering documents and registration statements. these suits specifically reference descriptions of the risks to investors, the quality of assets in the securitization, the order in which investors would be paid or other factors. most of these lawsuits are in the early stages, and it is difficult to ascertain the probability that investors will be able to shift a substantial portion of the losses on defaulted mortgages, specifically, or mortgage - backed securities back to the parties that sold the loans or underwrote the offerings. nevertheless,

condition. as i indicated at the beginning of my statement, the occ, the ots, the fdic, and the federal reserve are in the process of conducting interagency targeted examinations of the foreclosure policies and practices of the financial institutions that control a majority of outstanding mortgage loans. the agencies expect to conclude the on - site portion of our examination process by the end of this year and plan to review the findings immediately thereafter. we want to ensure that our analysis is comprehensive and provides a basis for development of remedial actions. currently, the banking agencies plan to publicly release a summary report highlighting the industry - wide findings in early 2011. in our examinations, the agencies are reviewing firms ’ policies, procedures, and internal controls related to foreclosure practices and are sampling loan files to test the effectiveness of those policies, procedures and internal controls. we are prepared to take supervisory action where necessary and appropriate to hold institutions accountable for poor practices. specifically, we are examining the firms ’ internal governance processes related to : ( 1 ) foreclosure policies and procedures ; ( 2 ) organizational structure, approval process, and staffing levels ; ( 3 ) vendor management of outside law firms ; ( 4 ) quality control processes and internal audit ; and ( 5 ) foreclosure workflow process and loan documentation procedures. we have also solicited information from consumer organizations to help us better direct our actions to detect problems at specific servicers and to determine whether systematic weaknesses are leading to improper foreclosures. for additional insights into foreclosure processes, we have sent a self - assessment questionnaire to other federal reserve - regulated institutions that have mortgage servicing activity but were not part of the interagency horizontal examination effort. the staff will analyze the responses from the firms and determine what follow - up work is required to validate the information they provide. the federal reserve requires supervised institutions to have sufficient corporate governance and maintain adequate risk - management programs to ensure the institution ’ s safety and soundness, as well to comply with consumer protection laws and regulations. institutions with identified weaknesses will be directed to take remedial actions. any remedial action mandated by the federal reserve will be consistent with the goals and objectives of the dodd - frank wall street reform and consumer protection act of 2010 to promote best practices and financial stability. supporting loan modifications notwithstanding the right of lenders to pursue foreclosure, the federal reserve encourages mortgage servicers to first pursue a sustainable