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 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. 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. As a result, representatives of some  servicers we interviewed told us they could not include remediation  information in the communication materials. 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. Initial Outreach Was Largely Uniform with Limited Targeted Outreach

Regulators approved a uniform process to reach eligible borrowers, with  additional targeted outreach limited to African-American and Spanish- speaking 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 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. Without  specific information about remediation in communication materials, some  borrowers may not be motivated to submit a request-for-review form. However, in  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. 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. Recommendations for Executive Action

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 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. Development and Content of Communication Materials

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. Planning and Evaluation of the Outreach and Advertising Approach

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. Interviews with Regulatory Staff and Stakeholders

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.
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 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 remediationan 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 need.

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 GAOs criteria. OCC also took issue with GAOs criteria in its technical comments.