Foreclosure Review: Opportunities Exist to Further Enhance Borrower Outreach Efforts Page: 2 of 72
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G A O FORECLOSURE REVIEW
Accountability * Integrity * Reliability
* * Opportunities Exist to Further Enhance Borrower
H ghhg9hts Outreach Efforts
Highlights of GAO-12-776, a report to
Why GAO Did This Study
In April 2011 consent orders, the Office
of the Comptroller of the Currency
(OCC), Federal Reserve, and the
Office of Thrift Supervision directed 14
mortgage servicers to engage third-
party consultants to review 2009 and
2010 foreclosure actions for cases of
financial injury and provide borrowers
remediation. To complement these
reviews, the regulators also required
servicers to establish an outreach
process for borrowers to request a
review of their case. This report
examines (1) the extent to which the
development of the outreach approach
and content of the communications
materials and website reflected best
practices, and (2) the extent to which
the planning and evaluation of the
outreach and advertising approach
considered the characteristics of the
target audience. To conduct this work,
GAO reviewed the design and
implementation of borrower outreach
activities and materials against best
practices and federal guidelines and
interviewed representatives of
servicers, consultants, community
groups, and regulators.
What GAO Recommends
OCC and the Federal Reserve should
enhance the language on the
foreclosure review website, include
specific remediation information in
outreach, and require servicers to
analyze trends in borrowers who have
not responded and, if warranted, take
additional steps to reach
underrepresented groups. In their
comment letters, the regulators agreed
to take actions to implement the
recommendations, while the Federal
Reserve took issue with GAO's criteria.
OCC also took issue with GAO's
criteria in its technical comments.
View GAO-12-776. For more information,
contact Lawrance L. Evans, Jr. at (202) 512-
8678 or firstname.lastname@example.org.
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.
United States Government Accountability Office
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United States. Government Accountability Office. Foreclosure Review: Opportunities Exist to Further Enhance Borrower Outreach Efforts, report, June 29, 2012; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc301220/m1/2/: accessed September 24, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.