June 13 U.S. Federal Reserve staff approved a multibillion dollar foreclosure settlement with banks earlier this year without a formal vote of the board governors, a top Fed official wrote in a letter to Congress.
Federal regulators reached settlements worth about $9.3 billion with 13 banks earlier this year to end case-by-case reviews of whether they had wrongly seized homes.
Senator Elizabeth Warren of Massachusetts, a Democrat who sits on the banking committee, and Representative Elijah Cummings of Maryland, who is the top Democrat on the House Oversight Committee, asked regulators for more information in January about the reviews after the settlements were announced.
The lawmakers said the public needed to know more about the process in order to trust it.
In a response letter to Warren dated June 11, Fed regulation czar Daniel Tarullo said the board members did not vote on the foreclosure settlement that was approved by the Fed staff. The lack of vote, however, does not have any bearing upon the settlement. (Tarullo letter:)
Tarullo said the Fed staff with "delegated approval authority" consulted the board members before approving the foreclosure settlement with the banks.
Fed's board of governors usually do not vote on matters involving enforcement actions, Tarullo wrote, adding that any board member can request review of actions taken by the staff.
The mortgage settlements proved controversial because they ended reviews that had already cost the banks some $2 billion but had not yet resulted in any relief to consumers. Banks including Bank of America Corp, JPMorgan Chase & Co and Wells Fargo & Co were part of the reviews.
Some 4.2 million people are receiving checks as part of the deal, which ran into new problems in May when the Fed said some borrowers received smaller checks than they should have.