Occ Foreclosure Review - 2 Big Banks Go With PWC - Us Bank & Citibank

DCC Engagement Letter - September 28, 2011 Submission
Privileged & Confidential DCC Supervisory Information

pwc
September 28, 2011
Re: Foreclosure Review Services
This engagement letter (the "Agreement") confirms that U.S. Bank National Association and U.S. Bank
National Association ND (together, "you" , "U.S. Bank" or "the Company"), has engaged
PricewaterhouseCoopers LLP ("we" or "us" or "PwC") to perform the services described below to assist you in
connection with compliance with certain requirements set forth in the consent order (the "Consent Order")
received by you from the Office of the Comptroller of the Currency ("OCC").
Background
U.S. Bank will engage an independent consultant acceptable to the OCC to conduct an independent evaluation
of certain foreclosure actions with respect to U.S. Bank's residential loan portfolio and servicing portfolio.
This evaluation will include residential foreclosure actions or proceedings (including foreclosures that were in
process or completed) for loans serviced by U.S. Bank and brought in the name of U.S. Bank, the investor, the
mortgage note holder, or any agent for the mortgage note holder (including the Mortgage Electronic
Registration Systems ("MERS")), that have been pending at any time from January 1, 2009 to December 31,
2010 (the "Review Period"), as well as residential foreclosure sales that occurred during the Review Period
(the "Foreclosure Review").
This Agreement which is subject to OCC approval is intended to outline an engagement approach that
determines the following:
(a) The methodology for conducting the Foreclosure Review, including:
(i) a description of the information systems and documents to be evaluated, including the selection of
criteria for cases to be evaluated;
(ii) the criteria for evaluating the reasonableness offees and penalties;
(iii) other procedures necessary to make the required determinations (such as interviews of employees and
third parties as a process for the submission and evaluation of borrower claims and complaints); and,
(iv) any proposed sampling techniques.
In setting the scope under clause (i) of this sub-paragraph, the independent consultant (PwC) may consider any
work already done by U.S. Bank or other third-parties on behalf of U.S. Bank. This Agreement contains a full
description of the statistical methods chosen, as well as procedures to increase the size of the sample depending
on the results of the initial sampling, subject to the prior approval of the OCC as discussed further herein.
(b) Resources to be dedicated to the Foreclosure Review - The PwC team structure and industry experience is
included in the PwC Team Structure and Industry Experience section below.
(c) Completion of the initial sample for the Foreclosure Review within approximately 90 days, with
acknowledgment that additional sampling may be required based on the results of the initial samples and that
the entire Foreclosure Review will be completed not later than 120 days after the OCC's approval of the
engagement. A discussion of the Consent Order-imposed timelines associated with the Foreclosure Review is
included in the Timeline section below .
IMinne'ap(Jlis. MN 55402
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OCC Engagement Letter - September 28, 2011 Submission
Privileged & Confidential Supervisory OCC Information
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Scope of Our Services & Responsibilities
You are engaging us to provide the professional consulting services outlined below (the "Services" or
"Foreclosure Review Services"). We will perform the Services in accordance with the Standards for
Consulting Services established by the American Institute of Certified Public Accountants. Accordingly, we
will not provide an audit or attest opinion or other form of assurance, and we will not verify or audit any
information provided to us by u.S. Bank or on u.S. Bank's behalf, or provided to us by independent legal
counsel. We are not providing, and shall at no time provide, any legal advice or legal opinions in connection
with this engagement. PwC makes no representations or conclusions regarding questions oflegal
interpretation. The Company should consult with its external counsel with respect to any legal matters or
items that require legal interpretation, under federal, state or other type oflaws or regulations, in connection
with this engagement or otherwise.
As provided for by the OCC, u.S. Bank wishes to engage PwC as its independent consultants to conduct an
independent evaluation of certain residential foreclosure actions. Because of PwC's role as independent
consultant, u.S. Bank will not attempt to direct or influence PwC's factual observations or findings that result
from the Foreclosure Review. U.S. Bank's further responsibilities in connection with this Agreement will be
set forth in the ''Your Responsibilities" section hereunder, or as otherwise mutually agreed by the parties.
PwC understands that u.S. Bank has engaged Gibson, Dunn & Crutcher LLP ("Gibson") as independent legal
counsel to provide legal representation to PwC with respect to Article VII of the Consent Order and legal
advice concerning matters covered by the Consent Order. Accordingly, PWC has an attorney-client
relationship with Gibson with all of the privileges and protections that arise out of the attorney-client
relationship. PwC further understands that Gibson will provide the legal advice necessary for completion of
the items listed in Article VII of the Consent Order (the "Review Criteria", such as (i) evaluating the criteria
and providing support for questions oflegal interpretation arising during the Foreclosure Review; and (ii)
providing guidance where a Review Criterion requires a legal opinion as to compliance with law or contract.
While u.S. Bank is paying for the services that Gibson will provide to PwC and for Gibson's representation of
PWC with respect to this Agreement, the engagement agreement between u.S. Bank and Gibson does not
create, and there does not exist, an attorney-client relationship between u.S. Bank and Gibson with respect to
the engagement between u.S. Bank and Gibson.
This Agreement does not cover, and the definition of "Services" does not include, the services that will be
provided by independent legal counsel, as those services will be covered by a separate agreement between
u.S. Bank and Gibson. Although PwC may utilize certain evaluation criteria and other information or
materials prepared by Gibson in order to provide the Services hereunder, PwC disclaims any and all
responsibility and liability for any such materials, information or data provided by u.S. Bank or Gibson in
connection with this engagement. PwC will refer any potential matters oflegal interpretation to Gibson, and
PwC will make no representations or conclusions regarding such matters. PwC understands, and u.S. Bank
agrees, that the Foreclosure Review, any documentation created in connection with the Foreclosure Review
Services, and any communications between and among PwC, u.S. Bank, and Gibson will not be subject to a
claim by u.S. Bank of protection under the attorney-client privilege or under the attorney work-product
doctrine.
PwC will provide a written report detailing its factual observations and findings from the Foreclosure Review
(the "Foreclosure Report"). PWC understands that Gibson will prepare a separate written report that sets
forth the legal conclusions that are called for by the Consent Order, which report shall be based upon the
factual findings and observations provided by PwC for legal interpretation.
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Independence of PwC as Independent Consultant
PwC agrees to use best efforts so that the Foreclosure Review Services will comply with all requirements set
forth in Article VII of the Consent Order and that it will conduct the Foreclosure Review Services as separate
and independent from any review, study, or other work performed by U.S. Bank or its contractors or agents
with respect to U.S. Bank's applicable mortgage servicing portfolio or U.S. Bank's compliance with other
requirements of the Consent Order, as set forth below:
1. As previously indicated, U.S. Bank (and/or its contractors or agents, as applicable) will not direct or
influence, or attempt to direct or influence PwC's factual observations or findings. PwC shall
immediately notify the OCC of any effort by U.S. Bank, directly or indirectly, to exert any such
direction, control, supervision, oversight, or influence over PwC.
2. PwC agrees that it is responsible for the conduct and results of the factual evaluation and factual
findings required by the Foreclosure Review, in accordance with the requirements of Sections 3 (a)
through (h) of Article VII of the Consent Order that do not require legal determinations or legal
analyses. As previously indicated, PwC understands that Gibson will prepare a separate written
report that sets forth the legal conclusions that are called for by the requirements of Article VII of the
Consent Order, which report shall be based upon the factual findings and observations provided by
PwC for legal interpretation. Engagement of independent legal counsel by U.S. Bank is subject to
OCC approval.
3. The conduct of the Foreclosure Review shall be subject to the monitoring, oversight, and direction of
the OCC. PwC agrees to promptly comply with all written comments, directions, and instructions of
the OCC concerning the conduct of the Foreclosure Review consistent with professional standards,
and that it will promptly provide any documents', workpapers, materials or other information
requested by the OCC.
4. PWC agrees to provide regular progress reports, updates and information concerning the conduct of
the Foreclosure Review to the OCC, as directed by the OCC.
5. PWC will conduct the Foreclosure Review using only personnel employed or retained by PwC to
perform the work required to complete the Foreclosure Review. PWC shall not employ or use
services provided by U.S. Bank employees, or contractors or agents retained by U.S. Bank with
respect to the Consent Order or with respect to matters addressed in the Consent Order, in order to
conduct the Foreclosure Review, except where the OCC specifically provides prior written approval
to do so.
6. Subject to the requirements and restrictions of 5. above, including the requirement of specific
approval by the OCC, PwC may utilize documents, materials or other information provided by U.S.
Bank, and may communicate with U.S. Bank, its contractors or agents, in order to conduct the
Foreclosure Review.
7. PwC agrees that any legal advice needed in conducting the Foreclosure Review Services shall be
provided by Gibson whose retention for that purpose has been approved by the OCC. As previously
indicated, PWC will refer any potential matters oflegal interpretation to Gibson, and PwC will make
no representations or conclusions regarding such matters. PwC agrees not to obtain legal advice (or
other professional services) in conducting the Foreclosure Review Services from U.S. Bank's inside
counsel, or from outside counsel retained by U.S. Bank or its affiliates to provide legal advice
concerning the Consent Order or matters contained in the Consent Order.
8. U.S. Bank's agreement with PwC must provide that if the OCC determines, in its sole discretion, that
PwC has not been fully compliant with the foregoing standards (numbers 1. through 7., above), the
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acc may direct U.S. Bank to dismiss PWC and retain a successor independent consultant, in which
case U.S. Bank shall have no further obligation to PwC other than for services performed up to that
date for U.S. Bank.
Scope
As noted above, the Foreclosure Review will include residential foreclosure actions or proceedings (including
foreclosures that were in process or completed) for loans serviced by U.S. Bank and brought in the name of
U.S. Bank, the investor, the mortgage note holder, or any agent for the mortgage note holder (including
MERS), that were pending at any time during the Review Period, as well as the residential foreclosure sales
that occurred during the Review Period.
Accordingly, the foreclosure actions considered within the scope of the Foreclosure Review will relate to loans
for which U.S. Bank conducted a foreclosure action on its own behalf (including, but not limited to,
foreclosure actions on loans purchased pursuant to an FDIC-assisted acquisition) or under a servicing
agreement for other investors.
Foreclosure actions on loans serviced by others on behalf of U.S. Bank or for which U.S. Bank's only role is as
trustee will be considered outside of the scope of the Foreclosure Review.
"""tA'''''.'' of record to be subject to the Foreclosure Review discussed herein include_
Bank Home Mortgage and certain u.s. Bank Consumer Lending Division
.S. Bank Consumer Lending Division mortgage loans only).
For purposes of the Foreclosure Review, in addition to the sampling methodology, Foreclosure Review
Services and reporting considerations further described herein, we anticipate performing various other
consulting Services, including but not limited to, interviewing U.S. Bank employees as well as third parties
which may have worked on behalf of U.S. Bank, accessing files that support information included within the
loan servicing systems of record, and reading U.S. Bank's policies and procedures, departmental flows and/or
other information relevant to the foreclosure processes. Specifically, the Foreclosure Review Services may
include, but not be limited to, the following:
interviews with U.S. Bank subject matter experts regarding U.S. Bank's loss mitigation activities;
evaluation of U.S. Bank's proprietary loss mitigation / loan modification evaluation tools to
understand the general functionalities and applicability to loss mitigation / loan modification
processes;
evaluation of U.S. Bank's loan servicing systems of records to understand functionality, applicability
to U.S. Bank proprietary workflows, and loan servicing system notes;
interviews with U.S. Bank subject matter experts in default management to understand processes
and workflows in the handling of foreclosures;
obtaining access to legal advice from Gibson necessary for completion of the Foreclosure Review
criteria related to the applicable laws and fees in force for the Review Period;
interviews with U.S. Bank foreclosure data resources to understand the composition of foreclosure
files, processes, and parameters used to create the files;
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interviews with the applicable U.S. Bank employees to understand the customer complaint process
related to foreclosure actions during the Review Period and periods subsequent to the Review
Period; and,
follow-up interviews as necessary to resolve questions during the Foreclosure Review.
In addition, we understand that the methodology for conducting the Foreclosure Review should include a
process for submission and evaluation of borrower claims and complaints - specifically focused on complaints
received by u.s. Bank subsequent to the issuance of the Consent Order that are from borrowers who believe
they have been financially harmed as a result of errors, misrepresentations, or other deficiencies associated
with foreclosures initiated or completed during the Review Period. Additional details associated with the
proposed Foreclosure Review Services surrounding the complaints process are included below.
Sampling Methodology
Based on guidance provided by the OCC to achieve the objectives of the Foreclosure Review, our approach to
the Foreclosure Review Services will include a two stage sampling approach that includes the following: a)
base samples that are representative of U.S. Bank's overall populations of mortgage loans subject to the
Consent Order requirements that are determined based on general sampling methodologies commonly
utilized; supplemented by b) additional risk-based samples that are associated with higher risk segments.
In determining the sample segmentations for both the base populations as well as the additional risk-based
segmentations, we will consider applicable information provided by U.S. Bank including internal reports or
reviews and previously performed borrower reviews by U.S. Bank's independent internal audit, compliance or
other internal risk management functions as well as any reviews performed by external consultants, auditors
and/or legal advisors, as applicable. Additionally, as part of the sample segmentation determinations, we will
also consider the results of regulatory examinations applicable to the subject matter of the Consent Order,
including reports issued by the OCC and/or Federal Deposit Insurance Corporation (the "FDIC").
The sampling methodology to be utilized will conform to the guidance provided in the Comptroller's
Handbook - Sampling Methodologies, August 1998 (the "Handbook"). Statistical sampling, specifically
numerical sampling, will be utilized to determine adherence to each of the requirements set forth in the
Consent Order. Pursuant to the Handbook, with numerical sampling, each item in a given population is
equally likely to be drawn and the population to be sampled is defined by the number of items. Numerical
sampling is used to reveal the presence (or absence) of a defined characteristic in a portfolio of items with
similar characteristics.
As further discussed in the Handbook, in numerical sampling, a precision limit is set by deciding how many
differences can be tolerated in the sample population; the more differences that can be tolerated, the higher
the precision limit should be. Reliability is the level of confidence in sample results. Selecting a reliability
level affects the size of a sample with the higher the reliability level, the greater the number of items within
the sample population to be assessed.
Based on the guidance contained within the Handbook as well as provided by the OCC, the sample sizes to be
utilized for assessing the requirements set forth in the Consent Order will be determined assuming a precision
level of 3% and a reliability level of 95% for each applicable population. Accordingly, the related sample size
for each population must be at least 100 items.
We understand through discussions with U.S. Bank as well as guidance provided by the OCC, that there is a
desired coverage across all states where U.S. Bank has initiated and/or completed foreclosure sales during the
Review Period. As such, from a sampling perspective and as part of the base sample determinations as
further discussed below, there will be a minimum of five sample items selected per applicable states in total
across all populations. This sampling approach will result in sample sizes for certain of the Consent Order
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requirements being in excess of the minimum sample size of 100 per population as it relates to the base
sample determinations.
The populations for each of the Consent Order requirements that will be subject to sampling - including both
the base sample populations as well as the additional risk-based segmentations - are further described below
in the Approach section. A random sample generator process will be utilized for purposes of selecting all
samples, including but not limited to the five sample items per applicable states. Additionally, as it relates to
the initial base sample determinations, all of the Consent Order requirements ((a) - (h) as included below)
will be evaluated as part of the Foreclosure Review Services. The Consent Order requirements to be evaluated
for the initial risk-based sample determinations is dependent upon the specific risk parameters which are
unique to each identified risk segmentation and are more fully explained below at an individual risk
segmentation level.
Pursuant to the Handbook, if no differences are found in the initial sample results, the desired statistical
reliability and precision levels have been attained and typically, no further evaluation is warranted. When
differences are found, further analysis is typically performed to evaluate the differences, including but not
limited to the root causes of the differences and whether the differences are isolated occurrences or are
reflective of any patterns and/or practices. Given the aforementioned precision level of 3% and a reliability
level of 95% for each of the populations, typically the existence of one difference would indicate that the
original reliability and precision levels are no longer valid.
In evaluating the initial sample results associated with each of the Consent Order requirements, certain base
assumptions will guide the overall evaluation of any preliminary observations - including but not limited to
the following:
Ifthe observation was not a divergence from the requirements of applicable state and/or federal law
as determined by Gibson and/or other aspects of the Consent Order requirements, the observation
will not be labeled as a difference.
Any observations that are determined to be differences will be evaluated to determine whether there
are any underlying themes and/or causes associated with the observations (including, but not
limited to multiple observations associated with a particular mortgage product type, multiple
observations associated with a particular foreclosure attorney, multiple observations associated with
respect to a particular state and/or related state-specific fees/penalties, etc.).
To the extent there are any common characteristics and/or attributes of the initial difference(s), an
additional sample may be selected and evaluated related to the corresponding population ofloans
with those specific characteristics/attributes identified to determine whether there is a pervasive
observation with respect to that population ofloans for which specific remediation plans should be
determined and put in place. Another alternative would be to perform additional sampling on the
population of all items exclusive of the subset of loans with the aforementioned specific
characteristics/attributes identified in the initial sample as a means of trying to further isolate the
existence of difference(s) to that subset only.
The approach to be taken for any additional samples will be based on individual facts and
circumstances associated with the results of the initial sample. Prior to initiating a subsequent
sample selection, we will discuss the applicable facts and circumstances with the OCC as well as will
inform u.S. Bank of the results of such discussions and any recommended additional sampling
procedures, as applicable. For any additional samples performed for a given Consent Order
requirement, the same precision level (3%) and reliability level (95%) will be utilized or a 100%
coverage may be considered based on the particular facts and circumstances of the initial sample
results. Additionally, while the Foreclosure Review Services for all of the initial base sample
determinations and certain of the risk-based sample determinations will address all of the Consent
Order requirements (a) - (h) as included in the table below, any additional sampling work will be
focused only on the particular attribute(s) and/or specific Consent Order requirement(s) for which
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differences were identified in the initial samples and will not include an evaluation of all of the
Consent Order requirements (a) - (h). OCC approval will be required for any incremental sample
selections.
All observations that are determined to be differences will be reported as such, regardless of the
dollar amounts involved. All differences will be further labeled to indicate whether the differences
represented errors, misrepresentations, or other deficiencies directly resulting in financial injury to
the borrower or mortgagee.
Key Consent Order Definitions and OCC Guidance
The OCC has issued guidance that includes, but is not necessarily limited to, relevant definitions with respect
to certain key terms within the Consent Order specific to the Foreclosure Review. The following guidance and
the related definitions are incorporated herein by reference and PwC will use best efforts so that its services in
connection with the Foreclosure Review are consistent with this guidance: OCC and FRB Guidance -
Financial Injury or Other Remediation (dated August, 29, 2011).
Approach
Foreclosure Review Services
and Reporting Considerations
Consent Order Scoping Assumptions
Requirements (Note that the Foreclosure Review Services and reporting
considerations described herein are preliminary and illustrative
only. The listing is not intended to be fully inclusive and will be
subject to further revisions based on continued industry
evaluations, benchmarking and/or specific facts and
circumstances unique to U. S. Bank and U. S. Bank's
operations, documentation and/or systems).
(a) Whether at the time of Base sample determination: a 1. Key Documents to be obtained, read and analyzed
the foreclosure action was numerical sampling approach include copies of the:
initiated or the pleading or supplemented with additional a. Original executed Note and any riders,
affidavit filed (including in judgmental sampling to ensure modifications, or amendments; and
bankruptcy proceedings the selection of a minimum of 5 b. Recorded mortgage or deed of trust;
and in defending suits files per state across all c. Endorsements, assignments and/or
brought by borrowers), the samples. allonges (as applicable) including any
foreclosing party or agent assignments to/from MERS.
of the party had properly Risk-based sample
documented ownership of determination: see scoping 2. With respect to the legal standing of the party
the promissory note and summary below. reflected in key documents, observations will be
mortgage (or deed of trust) reported for the following:
under relevant state law, or a. Inconsistencies between the name of the
was otherwise a proper foreclosing party as reflected on the first
party to the action as a legal notice and anyone of the following:
result of agency or similar i. The party per the most recent
status. available note endorsement; or
ii. The party named within the most
recent assignment of the
mortgage/deed of trust; or
iii. The party named in the servicing
agreement.
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Consent Order
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(b) Whether the
foreclosure was in
accordance with applicable
state and federal laws,
including but not limited to
the Servicemembers Civil
Relief Act ("SCRA") and
the U.S. Bankruptcy Code.
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Scoping Assumptions
(Note that the Foreclosure Review Services and reporting
Base sample determination: a 1. SCRA - Observations will be reported for the
numerical sampling approach following:
supplemented with additional a. Lack of coding (and/or miscoding) for
judgmental sampling to ensure SCRA status within the loan records on
the selection of a minimum of 5 the servicing system(s);
files per state across all b. Missing active duty orders for loans with
samples. SCRA coding;
c. Any applicable state laws regarding
Risk-based sample military service member protections were
determination: see scoping not followed;
summary below. d. Evidence of SCRA status/protection
within the servicer logs and/or other legal
documentation received by U.S. Bank for
borrowers with a foreclosure initiation
and/or sale;
e. Instances where the servicing actions
were inconsistent with any waivers and/or
other legal documentation evidencing
stays of SCRA protection;
f. Situations where the maximum rate of
interest exceeded permissible levels for
borrowers from which U.S. Bank had
received a written request for relief and a
copy of the service member's military
orders;
2. Bankruptcy - Borrower files will be evaluated to
determine whether foreclosure proceedings took
place while the borrower was subject to some
form of protection via U.S. bankruptcy laws.
Observations will be reported for the following:
a. Using available independent search
capabilities (e.g., the PACER website
functionality), situations where the
borrower was in active bankruptcy and
foreclosure proceedings were initiated
and/or conducted unless evidence exists
that the bankruptcy stay was lifted or the
bankruptcy has been dismissed and/or
discharged prior to the foreclosure
actions.
3. With respect to the key documents, timing
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(c) Whether the
foreclosure sale occurred
when an application for a
loan modification or other
Loss Mitigation (as defined
in the Consent Order) was
under consideration; when
the loan was performing in
accordance with a trial or
permanent loan
modification; or when the
loan had not been in
default for a sufficient
period of time to authorize
foreclosure pursuant to the
terms of the mortgage loan
documents and related
agreements.
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Scoping Assumptions
requirements and waiting periods identified in
the state law matrices provided by independent
legal counsel, observations will be reported for
the following:
a. Specific notices that were not sent in
accordance with the state laws;
b. State mandated waiting periods or
notifications, publishings, postings
and/or mailing requirements pursuant
to state laws were not satisfied; and
c. Any documents/communications
required per state laws and/or filed in a
court of law that did not correctly list
accurate borrower's names, property
addresses, indebtedness amounts
and/or other relevant amounts/data
and/or were not provided within
required legal notification periods.
Base sample determination: a 1. With respect to delinquency and loss mitigation
numerical sampling approach status activities/information, observations will be
supplemented with additional reported for the following:
judgmental sampling to ensure a. Delinquency status
the selection of a minimum of 5 i. Lack of evidence of the
files per state across all submission of a "breach" or
samples. "acceleration" letter to the
borrower pursuant to state law
Risk-based sample and/or note requirements;
determination: see scoping ii. Instances where the period of
summary below. delinquency prior to issuance of
the "breach" or "acceleration"
letter was less than an
established requirement; and/or
iii. Instances where the period of
time that lapsed between
breach and initiation of
foreclosure proceedings was
less than an established
requirement.
b. Loss mitigation
i. Evidence of communications
with the borrower relating to a
loss mitigation solution (e.g.,
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(d) Whether, with respect
to non-judicial
foreclosures, the
procedures followed with
respect to the foreclosure
sale (including the
calculation of the default
period, the amounts due,
and compliance with notice
periods) and post-sale
confirmation were in
accordance with the terms
of the mortQaQe loan and
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Seoping Assumptions
short sale, deed-in-lieu, or
modification) within the 30 days
prior to the foreclosure sale date
(as based on the reading of
servicing system notes and/or
other forms of borrower
communication) where the
denial decisioning was not
documented;
ii. Any indication of a lack of
communication of loss
mitigation options being
presented to the borrower in
those situations where borrower
contact was successfully made
(as based on the reading of
servicing system notes);
iii. For those instances where
borrower communication was
not successfully made, any
indication that contact efforts
were not made on at least a
monthly basis during the period
of delinquency; and
iv. For those instances where a
foreclosure sale occurred when
the borrower was performing in
permanent loan modification.
Base sample determination: a 1. As it relates to non-judicial foreclosure activities,
numerical sampling approach observations will be reported for the following:
supplemented with additional a. Inconsistencies between the unpaid
judgmental sampling to ensure principal balance per the servicing system
the selection of a minimum of 5 and the unpaid principal balance as
files per state across all included within the "breach" or
samples. "acceleration" letter as of issuance date
and/or unpaid principal amounts at the
Risk-based sample date of the foreclosure sale;
determination: see scoping b. Any observations as determined through
summary below. the performance of the "delinquency and
loss mitigation status procedures"
outlined above;
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state law requirements.
(e) Whether a delinquent
borrower's account was
only charged fees and/or
penalties that were
permissible under the
terms of the borrower's
loan documents, applicable
state and federal law, and
were reasonable and
customary.
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Scoping Assumptions
evaluations, benchmarking andlor specific facts and
c. Situations where the default period had
not been calculated correctly, as defined
in the original mortgage or deed of trust.
d. Situations in which the period between
the foreclosure legal notifications and
foreclosure sales dates exceeded an
established requirement; and
e. Instances in which the post-sale
confirmation was issued and/or executed
after an established requirement.
Base sample determination: a 1. Fees - Observations will be reported for those
numerical sampling approach instances in which the fees and/or penalties
supplemented with additional charged to the borrower differed from the list of
judgmental sampling to ensure permissible fees as defined in Exhibit B.
the selection of a minimum of 5
files per state across all 2. With respect to the list of permissible fees as
samples. defined in Exhibit B, observations will be
reported for those instances in which the fees
Risk-based sample charged by U.S. Bank were in excess of the
determination: see scoping permissible fees/penalties.
summary below.
3. With respect to the original loan documents,
The period of delinquency and observations will be reported for those instances
assessment of fees or penalties where:
will be limited to those fees a. Late charges assessed the borrower
and/or penalties charged to the exceeded the contractual maximum
borrower beginning with the late charge as specified in the note;
first period of delinquency and and
continuing through the b. Any other charges contractually limited
foreclosure process for those by the note, mortgage, or deed of trust,
loans which were subject to a if any, that exceeded the amount
foreclosure proceeding during contractually agreed upon.
the Review Period.
4. Observations will be reported for fees and/or
penalties assessed to the borrower were not
within the definition of reasonable and
customary as defined within the OCC's financial
injury guidance dated August 29, 2011 as
previously incorporated herein by reference.
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(f) Whether the frequency
that fees were assessed to
any delinquent borrower's
account (including broker
price opinions) was
excessive under the terms
of the borrower's loan
documents and applicable
state and federal law.
(g) Whether Loss
Mitigation Activities with
respect to foreclosed loans
were handled in
accordance with the
requirements of the Home
Affordable Modification
Program ("HAMP"), and
consistent with the policies
and procedures applicable
to U.S. Bank's proprietary
loan modifications or other
loss mitigation programs,
such that each borrower
12 of 48
Scoping Assumptions
Base sample determination: a
numerical sampling approach
supplemented with additional
judgmental sampling to ensure
files per state across all
samples.
Risk-based sample
determination: see scoping
summary below.
The period of delinquency and
assessment of fees or penalties
will be limited to those fees
and/or penalties charged to the
borrower beginning with the
first period of delinquency and
continuing through the
foreclosure process associated
with the most recent period of
default for those loans which
were subject to foreclosure
proceeding(s) during the
Review Period.
Base sample determination: a
numerical sampling approach
supplemented with additional
judgmental sampling to ensure
files per state across all
samples.
Risk-based sample
determination: see scoping
summary below.
operations, documentation and/or
1. Frequency of Fee Assessments - Observations will
be reported for those instances in which the fees
and/or penalties charged to the borrower differed from
the list of permissible fees as defined in Exhibit B. With
respect to the list of permissible fees as defined in
Exhibit B, observations will be reported for those
instances in which the frequency of fees charged by
U.S. Bank exceeded established requirements.
2. With respect to the original loan documents,
observations will be reported for those instances
where:
a. Late charges assessed the borrower
exceeded the frequency of assessment
contractually permitted in the loan
documents; and
b. Any other charges contractually limited
by the note, mortgage, or deed of trust,
if any, instances where the fee or
penalty was assessed more frequently
than contractually permitted.
1. HAMP Loss Mitigation
a. With respect to the eligible HAMP
population (i.e., which investors have
opted into the program), observations will
be reported for the following:
i. Lack of contact for HAMP
solicitation of eligible borrowers;
ii. Lack of evidence of the review
and/or analysis of information
returned by the borrower for
modification consideration;
iii. Inconsistencies between HAMP
and management's
USBK-EL-00000012
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Consent Order
Requirements
had an adequate
opportunity to apply for a
Loss Mitigation option or
program, any such
application was handled
properly, a final decision
was made on a reasonable
basis, and was
communicated to the
borrower before the
foreclosure sale.
13 of48
Scoping Assumptions
approvallrejection decision
utilizing the information returned
by the borrower (including but
not limited to debt to income
and/or net present value
calculations); and
iv. Evidence of notifications of
approval or rejection were
provided to the borrower in
excess of an established
requirement.
2. Proprietary Loss Mitigation (i.e., all non-HAMP
modifications/loss mitigation)
a. With respect to the eligible proprietary
loss mitigation population (which will be
defined to include forbearances, loan
modifications, short refinances, short
sales, cash for keys and/or deed-in-lieu-of
foreclosures), observations will be
reported for the following:
i. Lack of evidence of the offering
of loss mitigation solutions to
borrowers;
ii. Lack of evidence of a
qualification analysis for those
borrowers who communicated
interest in a loss mitigation
solution;
iii. Inconsistencies between loss
mitigation eligibility and
management's
approvallrejection decision
utilizing the information returned
by the borrower (including but
not limited to debt to income
calculations); and
approval or rejections were not
provided to the borrower within
an established requirement.
USBK-EL-00000013
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Consent Order Scoping Assumptions
Requirements (Note that the Foreclosure Review Services and reporting
For purposes of completing the aforementioned
Foreclosure Review Services, only the most recent/last
HAMP modification and the most recent proprietary
loan modification/loss mitigation activity associated with
the most recent period of default, as applicable, will be
evaluated. All other previous modifications/loss
mitigation activities - HAMP or non-HAMP - will be
excluded from the evaluation.
Additionally, for those foreclosures that relate
specifically to denied, declined and/or rejected HAMP
and/or proprietary loan modification programs specific
to debt-to-income and/or net present value
calculations, the evaluation will consider whether or not
U.S. Bank's HAMP program models were certified
and/or approved for use by the MHAC, other feedback
received from the MHAC regarding the net present
value tools in place over the Foreclosure Review
period, the extent and nature of any FDIC reviews over
the FDIC net present value tools/calculators, and/or the
controls that existed within U.S. Bank around the net
present value tools/calculators.
(h) Whether any errors, Sample size: previous samples Observations related to steps performed within
misrepresentations, or for Consent Order requirements Consent Order requirements (a) - (g) will be considered
other deficiencies identified (a) - (g). in relation to actual damages to the borrower. Any
in the Foreclosure Review observation for which there is evidence, based on the
resulted in financial injury Foreclosure Review Services performed and
to the borrower or the supporting documentation,that the observation resulted
mortgagee. in financial injury as previously defined herein by
reference will be reported as a difference.
Defined Populations - Base Sample Determinations
Individual samples will be selected from each of the following applicable populations for the purposes of the Consent
Order requirements:
u.s. Bank Consumer Lending Division (Ohio) - Judicial Foreclosures
U.S. Bank Consumer Lending Division (Ohio) - Non-judicial Foreclosures
14 of 48
USBK-EL-00000014
DCC Engagement Letter - Septemher 28, 2011 Suhmission
pwc
u.s. Bank Consumer Lending Division (Ohio) - Foreclosure Sales
U.S. Bank Consumer Lending Division (Minnesota-FAMG) - Judicial Foreclosures
U.S. Bank Consumer Lending Division (Minnesota-FAMG) - Non-judicial Foreclosures
U.S. Bank Consumer Lending Division (Minnesota-FAMG) - Foreclosure Sales
U.S. Bank Home Mortgage (all divisions, excluding loans subject to FDIC Loss Sharing Agreements)
Judicial Foreclosures
U.S. Bank Home Mortgage (all divisions, excluding loans subject to FDIC Loss Sharing Agreements) - Non
judicial Foreclosure
U.S. Bank Home Mortgage (all divisions, excluding loans subject to FDIC Loss Sharing Agreements)
Foreclosure Sales
Loans Subject to FDIC Loss Sharing Agreements - Judicial Foreclosures
Loans Subject to FDIC Loss Sharing Agreements - Non-judicial Foreclosures
Loans Subject to FDIC Loss Sharing Agreements - Foreclosure Sales
Junior liens with foreclosures processed by U.S. Bank Consumer Lending Division - one (1) sample covering
both the Ohio and Minnesota-FAMG populations combined
Basisjor Samples Selections & Total Sample Sizesjor each Consent Order Requirement - Base Sample
Determinations
As it relates to the scoping assumptions and defined populations outlined above, the basis for the sample selections
and the overall number of sample items for each Consent Order requirement is summarized as follows:
400 judicial foreclosure initiations;
400 non-judicial foreclosure initiations;
400 foreclosure sales;
100 junior liens with foreclosures;
the aggregate 1,300 sample selections (400 judicial initiations + 400 non-judicial initiations + 400 sales +
100 junior lien foreclosures) will be the base sample for which the Foreclosure Review Services will be
performed for each of the Consent Order requirements (a) - (h); and
additional selections may be made, as applicable, to ensure that the overall sample of foreclosure initiations
and sales includes a minimum of 5 selections per state.
Defined Populations - Risk Based Sample Determinations
In order that the Foreclosure Review provides coverage across a number of foreclosure characteristics, the base
sample determinations will be supplemented with a number of samples that are based on a granular segmentation of
higher risk-based characteristics. The following table is intended to summarize the segmentation of U.S. Bank's
portfolio, the determination of the applicable risk-based samples, and the expected approach to the performance of
the Foreclosure Review Services for these risk-based components (i.e., sample approach vs. 100% coverage).
Additionally, with respect to each of the risk-based sample determinations included in the following table, the
applicable Consent Order requirements (a) - (h) to be evaluated as part of the Foreclosure Review Services are
presented.
15 of 48
USBK-EL-00000015
Privileged & Confidential Supervisory oee Information
pwc
(All "Estimated Population Size" numbers included in the table below are preliminary estimates based on initial
inquiries of u.s. Bank personnel. These numbers may be subject to revision upon completion ofadditional data
gathering activities.)
Potential Higher Estimated Sample Size Basis for Higher Risk Segmentation Consent Order
Risk Segmentations Population Size Approach Requirements
Evaluated
Top foreclosure states Not Applicable- Not Applicable Given that the base sample determinations Not Applicable
already associated with the defined populations are
incorporated generated using a random sample
within base generator process, the resulting selections
sample for the base samples should be
determinations representative of the geographic
concentration risks that exist within the
U.S. Bank populations. Additionally, even
though higher foreclosure volumes by state
might be indicative of potential higher risk
factors, there is no current basis to
conclude that there is a higher risk of
financial injury associated with these
states, As such, inclusion of a separate
higher risk segment for the top foreclosure
states is not considered necessary.
To the extent there are any identified
trends that are state/geography based with
respect to observations and/or financial
injury within the initial base sample and/or
risk-based sample determinations,
additional samples focused on those
geographic characteristics will be
considered.
Coverage of all 50 states Not Applicable - Not Applicable Given that the base sample determinations Not Applicable
already associated with the defined populations
incorporated already incorporate the inclusion of a
within base process for additional selections to ensure
sample that the overall sample offoreclosure
determinations initiations and sales includes a minimum
offive (5) selections per state, inclusion of
a separate higher risk segment for this
geographic characteristic is not considered
necessary.
Quarters during the Not Applicable - Not Applicable Given that the base sample determinations Not Applicable
Review Period with already were generated using a random sample
increased volumes of incorporated generator process, the resulting selections
foreclosure referrals within base for the base samples should be
and/or sales sample representative of the relative volumes of
16 of 48
USBK-EL-00000016
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Potential Higher
Risk Segmentations
Specific law firms -law
officesoflllllllllll
Specific law firms -
terminated law firms
because of errors
17 of 48
Estimated
Population Size
determinations
completed
foreclosures
-290
-10
Terminated law
firms because of
errors:
2 specific law
firms
see previous
high risk
segment)
Sample Size
100%
(Estimated 300
in total)
Minimum
sample of 100
Basis for Higher Risk Segmentation
Approach
foreclosure referrals and/or sales quarter
over-quarter during the Review Period.
Additionally, even though higher
foreclosure volumes in any given quarter
might be indicative of potential higher risk
factors, there is no current basis to
conclude that there is a higher risk of
financial injury associated with any
particular quarter within the Review
Period, As such, inclusion of a separate
higher risk segment for quarters during the
Review Period with higher levels of
foreclosure referrals and/or sales is not
considered necessary.

the __based
a firm with signifi
, ., ,',
I
fies
as
ted
to foreclosure practices. Accordingly,
100% of completed foreclosure sales
processed by thewill
be included within this higher risk
segmentation.
During the Review Period, U.S. Bank has
terminated relationships with two (2)
foreclosure law firms as a result of U.S.
Bank's then-existing quality control
processes identifying certain quality
concerns over these law firms' processing
of foreclosure acti
the aforementione
See previous discussion above which
indicates that 100o/.II!IlIId
foreclosures by the
will be evaluated. Wit respect to the
second law firm, approximately 1,300
foreclosure sales were processed by this
firm during the Review Period. A
minimum sample of 100 completed
foreclosure sales by this second law firm
during the Review Period will be selected
for purposes of the Foreclosure Review
Services.
The above listing does not include other
relationships with foreclosure law firms
that were terminated solei because of a
Consent Order
Requirements
Evaluated
A throughH
A through H
USBK-EL-00000017
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Potential Higher
Risk Segmentations
Specific law firms -
GSE delisted law firms
and/or other externally
identified problem law
firms
Large volume
foreclosure firms
18 of 48
Estimated
Population Size
GSE delisted law
firms and/or
other externally
identified
problem law
firms
7 law firms in
total
-. :I.' I
see previous
high risk
segment)
Not Applicable -
already
incorporated
within base
sample
determinations
Sample Size
Minimum
sample of 100
Approach
lack of responsiveness to U.S. Bank's
requests or other reasons not related to
alleged deficiencies in connection to the
affected firms' foreclosure practices.
Given that these law firms do not represent
a higher risk with respect to financial
injury to the borrowers and/or other
aspects of the Consent Order, no higher
risk segment is considered necessary with
respect to these other terminated law firms.
Given the increased risk associated with
foreclosure attorneys that have been
delisted by the GSEs and/or have been
identified outside of U.S. Bank as having
higher frequencies of errors in the handling
offoreclosures, the Foreclosure Review
Services will include as a higher risk
segment, a minimum sample of 100
completed foreclosure sales across the
listing of available/reported GSE delisted
law firms and/or other externalIy identified
problem law firms. Based on inquiries of
U.S. Bank personnel, seven (7) such law
firms were utilized by U.S. Bank during
the Review Period for foreclosure
processing -

Total completed foreclosures with respect
to these seven the Review
Period (including__
approximated 1,300.
For purposes of the 100 completed
foreclosure sales across these law firms, a
judgmental sampling approach will be
utilized to ensure the selection of a
minimum of 5 completed foreclosure sales
per law firm, as applicable.
Not Applicable Given that the base sample determinations
associated with the defined populations are
generated using a random sample
generator process, the resulting selections
for the base samples should be
representative ofthe volume offoreclosure
firms used by U.S. Bank. AdditionalIy,
similar to that as reviousl described
Consent Order
Requirements
Evaluated
A throughH
Not Applicable
USBK-EL-00000018
p-wc
Potential Higher Estimated
Risk Segmentations Population Size
Other third party Not Applicable
vendors
Document execution Not Applicable
service providers
Rescinded foreclosures Estimated
number of
rescinded
foreclosures:
KY - 280
OHiMN - 30
CA-20
19 of 48
Sample Size Basis for Higher Risk Segmentation Consent Order
Approach Requirements
Evaluated
regarding high volume foreclosure states,
even though higher foreclosure volumes
by law firms might be indicative of
potential higher risk factors, there is no
current basis to conclude that there is a
higher risk of financial injury associated
with these law firms, As such, inclusion of
a separate higher risk segment for the top
foreclosure attorneys is not considered
necessary.
To the extent there are any identified
trends that are foreclosure firm centric
with respect to observations and/or
financial injury within the initial base
sample and/or higher risk sample
determinations, additional samples focused
on those identified foreclosure attorneys
will be considered.
Not Applicable Through inquiries of U.s. Bank personnel, Not Applicable
there are no other third party vendors of
u.s. Bank that have significant roles
within the foreclosure process beyond the
foreclosure attorneys discussed above.
Accordingly, the inclusion of a separate
higher risk segment for miscellaneous
other third party vendors is not considered
necessary.
Not Applicable Through inquiries of U.s. Bank personnel, Not Applicable
there are no document execution services
providers utilized by U.S. Bank within the
foreclosure process. Accordingly, the
inclusion of a separate higher risk segment
for this categorization is not considered
necessary.
100% "Mortgage rescissions" are defined as A through H
those foreclosure sales which had been
(Estimated 330 completed and were rescinded by U.S.
in total) Bank for various reasons, e.g., additional
facts/information obtained, a new
opportunity for a loan modification,
additional procedures, etc.) Given the risk
profile associate with mortgage
rescissions, the Foreclosure Review
USBK-EL-00000019
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Modifications that were Estimated
foreclosed modifications
and/or pending
and loan
modifications
Pending loan and/or loss
modifications and/or mitigations:
loss mitigation
KY - 1,445
OHiMN - 570
CA - 250
20of48
Evaluated
Services contemplate 100% coverage of all
rescinded foreclosures during the Review
Period.
Minimum Given that the initial base sample and A through H
sample of 100 higher risk sample determinations
associated with the defined populations
already incorporates evaluation of all
modification/loss mitigation activities
associated with all selected loans, 100%
coverage of modifications and/or loss
mitigation activities (whether foreclosed
vs. pending) is not considered necessary.
However, because of the increased risk
profile associated with these identified
foreclosures, the Foreclosure Review
Services will include a higher risk segment
that incorporates a minimum sample of
100 for the following:
- mortgages that included modifications
which subsequently went through a
completed foreclosure sale; and
- pending loan modifications/loss
mitigations at the time of a completed
foreclosure sale.
(See separate high risk segment for denied,
declined and/or rejected HAMP and/or
proprietary loss mitigation programs
below.)
The referenced populations and related
sampling approach described herein are
based on modifications/loss mitigation
activities associated with completed
foreclosure sales during the Review
Period. A separate sampling approach for
modificationslloss mitigation activities
associated with initiated foreclosure sales
is not considered necessary given that the
initial base sample determinations includes
separate samples for initiated judicial and
non-judicial foreclosures during the
Review Period and those populations will
be subjected to an evaluation of
modification/loss mitigation activities
associated with those selected initiated
foreclosures.
USBK-EL-00000020
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Potential Higher
Risk Segmentations
Insufficient default
period prior to
foreclosure
Denied/declined/rej ected
HAMP and/or
proprietary loan
modification programs -
specifically related to
debt-to-income and/or
net present value
calculation results
210f48
Estimated
Population Size
Estimated
insufficient
default period:
KY -0
OHiMN - 0
CA-O
Estimated
population size:
KY - 1,340
OHiMN - 550
CA - 1,125
Sample Size
Not Applicable
CA location:
100%
KY location:
Minimum
sample of 100
OH/MN
location:
Minimum
sample of 100
Approach
Based on inquiries with U.S. Bank
personnel, given that all foreclosure
activities are triggered by servicing
system-based delinquency and default
informatiOn/status, existing system
controls prevent foreclosure activities from
being commenced prior to a sufficient
default period having elapsed.
Accordingly, the inclusion of a separate
higher risk segment for such situations is
not considered necessary. This assertion is
further complemented by the timing of
foreclosure proceedings being initiated
being part ofthe evaluation of the Consent
Order requirements for samples generated
under both the initial base sample
determinations and certain of the initial
risk-based sample determinations.
Consent Order
Requirements
Evaluated
Not Applicable
The results of recent OCC and other C, G and H only
regulatory institutions (e.g., FDIC) have
identified denied, declined and/or rejected
modifications as an industry-wide concern
specifically as it relates to the performance
and/or evaluation of debt-to-income and/or
net present value calculations in the
decisioning around HAMP and/or
proprietary modification programs. To the
extent the debt-to-income and/or net
present value calculations were performed
incorrectly and foreclosure activities were
commenced/completed, there is a higher
risk of a borrower being potentially
financially injuredlharmed.
Accordingly, the Foreclosure Review
Services will include a higher risk segment
for denied, declined and/or rejected
modifications during the Review Period
whereby the indicated denial reasons was
specifically attributed to the debt-to
income and/or net
calculations
specific to U.s.
vU.llU.J111IIU ",,,aUUI.J, there may be a
heightened risk specific to this location
and accordin I , the Foreclosure Review
USBK-EL-00000021
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Potential Higher
Risk Segmentations
220f48
Estimated
Population Size.
Sample Size Basis for Higher Risk Segmentation
Approach
the same
heightened level of risk is not as applicable
to the Kentucky and OhiolMinnesota
locations and accordingly, the Foreclosure
Review Services will incorporate a
minimum sample of 100 for the Kentucky
. location and a separate minimum sample
of 100 for the Ohio/Minnesota locations.
The scope of the testing to be performed
related to each selected borrower will be
specifically focused only on the
evaluation, calculation and decisioning
associated with the debt-to-income and net
present value calculations. Procedures to
be performed around the net present value
tools/calculators will include consideration
of whether or not U.S. Bank's HAMP
program models were certified and/or
approved for use by the MHAC, other
feedback received from the MHAC
regarding the net present value tools in
over the
over present value
tools/calculators, any internal and/or
external model validation activities related
to the net present value tools/calculators,
and/or the controls that existed within U.S.
Bank around the net present value
tools/calculators.
Additionally, only the most recent/last
HAMP modification and the most recent
proprietary modification associated with
the most recent period of default will be
evaluated as part of this higher risk
segment. All other previous modifications
that may have been evaluated by U.S.
Bank related to the selected borrowers will
be excluded from this evaluation.
No further segmentation of modification
activity is considered necessary given that
modifications are also part of the
evaluation ofthe Consent Order
requirements for samples generated under
both the initial base and certain of
Consent Order
Requirements
Evaluated
USBK-EL-00000022
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Borrower with debt Estimated
cancellation product population size:
from U.S. Bank
Approximately
65
"Pyramiding fees" - fees Not Applicable -
assessed prior to U.S. Bank loan
delinquency documents and
precipitating foreclosure collection
practices do not
include
"pyramiding
fees"
230f48
Evaluated
the risk-based sample determinations.
(Total sample size for this higher risk
segment - approximately 1,325 borrowers
with denied, declined and/or rejected
HAMP and/or proprietary loss
mitigations/modifications.)
100% Based on inquiries of U.S. Bank personnel, A through H
there are approximately 65 foreclosures
associated with applicable debt
cancellation products. Based on inquiries
of U.S. Bank personnel, U.S. Bank does
not typically offer debt cancellation
products that provide borrower protection
in the event of a loss of employment.
Most debt cancellation products are
typically triggered by death or disability
events and for these types of products, they
are typically cancelled/voided upon the
occurrence ofmuItiple missed payments
on the linked mortgage. Accordingly, the
Foreclosure Review Services will include
a higher risk segment that incorporates
100% coverage of those foreclosures
which were with a borrower that had a
debt cancellation product that were not
contractually voided/cancelled based on
the existence of delinquency status on the
related mortgage.
Not Applicable Based upon preliminary assessments of Not Applicable
certain foreclosure files and inquiries of
U.S. Bank personnel, it appears that U.S.
Bank loan documents and collection
practices do not provide for "pyramiding
fees" and no such fees were collected.
Given this fact and given that the
permissibility and reasonableness of fees is
part ofthe evaluation of the Consent Order
both the initial base sample determinations
and certain of the initial risk-based sample
determinations, there will be no higher risk
segment related to "pyramiding fees" for
purposes ofthe Foreclosure Review
Services.
USBK-EL-00000023
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Complaints received Estimated
from January 1,2011 - population size:
October 21,2011
TBD
Claims/Complaints Estimated
received from January I, population size
2009 - December 31,
2010 KY - 600
OH/MN - 60
CA- 365
240f48
Evaluated
100% Pursuant to the guidance provided by the Only the
OCC and as further detailed within this applicable
engagement letter, the Foreclosure Review Consent Order
Services will include evaluation ofa 100% requirement
of the post-December 31,2010 complaints specific to each
that are associated with foreclosure claim/complaint
activities applicable to the Review Period where the
thru the completion date of the Foreclosure nature/form of
Review Services. In-scope complaints will the
include complaints associated with the in- claim/complaint
scope population regardless of whether is specific to a
received thru previously existing U.S. given Consent
Bank claim/complaint channels or thru the Order
third party vendor-facilitated requirement. If
claim/complaint process under not specific
development as further discussed herein. and/or multiple
Consent Order
requirements are
specified in the
claim/complaint,
an A through H
assessment will
be performed.
Minimum Claims/complaints are a potential indicator Only the
sample of 100 that a borrower may have incurred a applicable
potential financial injury with respect to a Consent Order
given foreclosure. Accordingly, the requirement
Foreclosure Review Services will include specific to each
the evaluation of a minimum sample of claim/complaint
100 claims/complaints that were received where the
directly from borrowers of U.S. Bank nature/form of
during the period from January 1, 2009 the
through December 31, 2010 as a higher claim/complaint
risk segment. Included within this is specific to a
segment are all complaints that were given Consent
received by the OCC's Customer Order
Assistance Group process and referred to requirement. If
U.S. Bank during the Review Period. not specific
and/or multiple
Consent Order
requirements are
specified in the
claim/complaint,
an A through H
assessment will
be performed.
USBK-EL-00000024
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Completed foreclosure Estimated
sales with a bankruptcy population size
filing date indication
subsequent to the KY - 1,530
foreclosure referral / OH/MN - 560
initiation date CA - 170
Foreclosure Not Applicable
referrals/initiations at
the time a borrower was
in active bankruptcy
status
Bankruptcy cases Estimated
referred to U.S. Bank population size:
resulting from the U.S.
Bankruptcy Trustees TBD
investigation
250f48
Evaluated
100% Foreclosure sales that were completed B and H only
when a borrower may have been entitled to
bankruptcy protection as indicated by a (bankruptcy
bankruptcy filing date subsequent to the check only)
foreclosure referral/initiation date would
indicate a potential violation of applicable
bankruptcy law. Accordingly, the risk for
potential financial injury is magnified and
therefore, 100% coverage of these
instances will be incorporated as a separate
higher risk segment.
Not Applicable Based on initial discussions with Not Applicable
management, U.S. Bank servicing systems
will not permit the processing of a
foreclosure transaction for which the
servicing system already indicates a
bankruptcy filing by the borrower. This
system control will be evaluated in
conjunction with the evaluation of
bankruptcy protection for borrowers as
part ofthe evaluation of the Consent Order
and certain of the initial risk-based sample
determinations. Accordingly, there will be
no higher risk segment related to
foreclosure referrals / initiations at the time
a borrower was in active bankruptcy
status.
TBD As communicated to PwC by the OCC, the Band H only
U.S. Bankruptcy Trustees may be
providing a list of bankruptcy-related (bankruptcy
foreclosure cases processed by U.S. Bank check only)
that may be indicative of a higher risk for a
violation of applicable bankruptcy law
and/or potential financ!al injury. These
cases would be identified through a U.S.
Bankruptcy Trustees investigation. To the
extent these bankruptcy cases are referred
to U.S. Bank during the timeframe ofthe
Foreclosure Review, [the sample size to be
evaluated will be determined dependent on
the nature of any list provided - potentially
up to 100%] of these cases will be
incorporated as a separate higher risk
USBK-EL-00000025
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Completed I initiated Estimated
foreclosures for which a population sizes:
bankruptcy notification KY - 5,920
had been received OH/MN - 560
CA - 170
(Estimated 6,650
in total)
Foreclosure cases Estimated
referred by state population size:
attorney generals, other
federal agencies (e.g., 220
HUD andlor GNMA)
andlor legislators (e.g., a
26of48
Evaluated
segment.
Sample Completed foreclosure sales andlor A through H
approach: referredlinitiated foreclosures where an
indication of bankruptcy protection may
have existed may be higher risk for a
violation of applicable bankruptcy law
Completed and andlor potential financial injury. From a
initiated coverage perspective, potential impacted
foreclosures: borrowers are subject to the following
evaluations:
minimum
sample ofl 00 a) completed foreclosure sales that
included a bankruptcy filing date
subsequent to the foreclosure referral I
initiation date are already segregated into a
separate higher risk segment and will be
evaluated at a 100% coverage level,
b) foreclosures which were near
completion status and for which a formal
mortgage rescission notice was provided to
the borrower as a result of bankruptcy
protection will also be subject to
evaluation within the separate "rescinded
foreclosures" higher risk segment at a
100% coverage level, and
c) the bankruptcy status of each
foreclosure initiation and sale is part of the
evaluation of the Consent Order
both the initial base sample and certain of
the risk-based sample determinations.
Accordingly, a higher risk segment will be
incorporated for all other bankruptcy-
related borrowers that are not already
subject to the aforementioned coverage
and will be evaluated through a minimum
sample of 100.
100% Foreclosures that have been completed that A throughH
include a notification to U.S. Bank by a
state attorney general, a federal agency
such as HUD andlor GNMA, andlor a
legislator (e.g., a U.S. Senator) that the
borrower may have been financially
USBK-EL-00000026
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U.S. Senator)
Completed foreclosures Estimated
with SCRA-related number of
indication completed
SCRA-related
foreclosures
KY -30
aH/MN -10
CA-O
27 of 48
Evaluated
injuredlhanned would generalIy be
considered to be representative of higher
risk items and pursuant to guidance
provided by the acc are representative of
a segment that will be evaluated at a 100%
level.
Complaints that were passed thru to U.s.
Bank's general counsel function from the
acc via the acC's Customer Assistance
Group process are excluded from this
segment as they are incorporated in the
complaint-related higher risk segments.
Accordingly, this higher risk segment
relates only to those foreclosure cases
specifically referred to U.S. Bank from
state attorney generals, a federal agency
and/or legislators related to foreclosures
during the Review Period.
100% Foreclosures that have been completed that B and H only
include an indication that the borrower
may have been subject to SCRA would be (SCRAcheck
indicative of a higher risk for the potential only)
violation of applicable state and/or federal
laws and therefore, the risk for potential
financial injury would also be magnified.
Accordingly, 100% coverage of any of
these instances will be incorporated as part
of the Foreclosure Review Services.
Procedures to be performed will include a)
analysis of the applicable servicer logs for
evidence of SCRA status/protection, b)
assessment of any documentation received
as part of the Foreclosure Review Services
related to SCRA status, and c) the
applicability of any waivers and/or other
legal documentation evidencing stays of
SCRA protection. In addition to the
foreclosure stay relief provisions provided
by SCRA, the procedures performed
would also include an assessment of the
maximum rate of interest which can be
charged to a service member upon the
receipt by U.S. Bank ofa written request
for relief and a copy of the service
member's military orders.
USBK-EL-00000027
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In-process foreclosures Estimated
with SCRA-related number of in-
indication process
foreclosures with
SeRA-related
indication
KY -35
OHIMN -5
CA-O
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DCC Engagement Letter - Septemher 28, 2011 Suhmission
Evaluated
Additionally, ongoing discussions with the
United States Department of Defense by
the OCC and/or other parties will be
monitored with respect to any progress by
the United States Department of Defense
with respect to their development of an
accessible database to query historical
active duty information.
100% PwC will evaluate any servicing system B and H only
queries and/or extracts that U.S. Bank may
be able to provide for the population of in- (SCRAcheck
process foreclosures that may have been only)
subject to SCRA protection. Procedures to
be performed on this population will
include a) analysis of the applicable
servicer logs for evidence of SCRA
status/protection, b) assessment of any
documentation received as part of the
Foreclosure Review Services related to
SCRA status, and c) the applicability of
any waivers and/or other legal
documentation evidencing stays of SCRA
protection. In addition to the foreclosure
stay relief provisions provided by SCRA,
the procedures performed would also
include an assessment of the maximum
rate of interest which can be charged to a
service member upon the receipt by U.S.
Bank of a written request for relief and a
copy of the service member's military
orders.
Additionally, ongoing discussions with the
United States Department of Defense by
the OCC and/or other parties will be
monitored with respect to any progress by
the United States Department of Defense
with respect to their development of an
accessible database to query historical
active duty information.
In addition, the SCRA status of each
foreclosure initiation and sale is part of the
and certain of the risk-based sample
determinations.
USBK-EL-00000028
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Potential Higher Estimated Sample Size Basis for Higher Risk Segmentation Consent Order
Risk Segmentations Population Size Approach Requirements
Evaluated
Known documentation Estimated Minimum Based on inquiry of U.S. Bank personnel, A through H
errors resulting from population size: sample of 100 there are no known errors that have been
testimony, interviews obtained from employee communications,
and/or other means of 1,490 legal testimony or other forms of
disclosures disclosures would indicate a potential
violation of applicable state and/or federal
laws and potential financial injury to the
borrower. One individual within U.S.
Bank's Cincinnati, OH location did
provide commentary to the oce that
indicated that the operational practices
followed by this individual with respect to
foreclosure processing may have differed
from practices of other employees at this
location; however, the operational
practices utilized by this individual did not
constitute a violation of any U.S. Bank
policy and there are no known instances of
the foreclosures processed by this
individual causing financial injury to a
borrower.
Given the magnified risk associated with
the foreclosures processed by the
aforementioned individual, a minimum
sample of 100 of these foreclosures will be
incorporated as part ofthe Foreclosure
Review Services.
The samples indicated above for both the initial base sample determinations as well as the risk-based sample
determinations are components of an overall population of applicable in-process/pending and/or completed
foreclosures during the Review Period totaling approximately 91,000. The breakdown of pending and/or completed
foreclosure sales is as follows:
Location Completed Foreclosures / Sales In-Process / Pending Foreclosures
Kentucky
25,928
41,733
Ohio / Minnesota 6,127 7,234
California 5,066 4,635
TOTAL 37,121 53,602
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Privileged & Confidential Supervisory OCC In/ormation
pwc
Approximately 1.5% of the total foreclosure population is being evaluated thru the initial base sample determinations
discussed above. An additional approximate 5.7% ofthe total foreclosure population is being evaluated thru the risk
based sample determinations.
With respect to the aggregate population numbers presented above as well as the higher risk segment populations
presented in the previous table, PwC will evaluate U.S. Bank's generation of the population information through
analysis of U.S. Bank-produced documentation related to the completeness and accuracy of this information, inquiry
of the applicable management team regarding the populations and processes for generating such information,
evaluation of and inquiry over U.S. Bank's evaluation of this popUlation information in comparison to previously
generated reporting for internal and external purposes, and/or other procedures considered necessary, as applicable.
Submission and Evaluation ofPost-Consent Order Complaints
Subsequent to the issuance of the Consent Order, the OCC has provided additional guidance to U.S. Bank
requiring a process for submission and evaluation of borrower claims and complaints related to foreclosures
during the Review Period. The OCC has provided guidance regarding a borrower outreach process for
complaints to be established related to foreclosure actions initiated, pending or completed during the Review
Period. The borrower outreach process is to be established by U.S. Bank and meet the objectives set forth by
communications from the OCC.
U.S. Bank has also been instructed by the OCC to participate in an approach to the borrower outreach and
complaint intake process that is coordinated amongst the other servicers that are subject to the Consent
Order ("Coordinated Approach"). The Coordinated Approach is being designed by these servicers and is
intended to provide consistency in the design and execution of outreach and intake. The Coordinated
Approach includes certain processes that will be executed by a common vendor on behalf of all servicers, and
other processes are to be executed by each servicer's respective vendor, but in a consistent manner.
The independent consultant's role is to advise on the type of process that U.S. Bank may use for the borrower
outreach complaint process and the related ongoing quality control and oversight processes designed to meet
the objectives of the OCC's guidance using the "Advisory Process" (defined below). Specifically, the
independent consultant is responsible for (i) advising on the development of the Coordinated Approach
together with U.S. Bank, (in advising on the development of U.S. Bank-specific implementation of the
. Coordinated Approach and the aspects of the complaint process that are not covered by the Coordinated
Approach, (iii) executing certain procedures to assess U.S. Bank's and U.S. Bank's vendor's execution of the
outreach and intake processes, (iv) incorporating all applicable claims and complaints into the Foreclosure
Review Services, and (v) performing an independent review of each in-scope complaint and reporting any
observations and differences, to include recommendations as to proposed remediation and/or compensation
to be made to each borrower identified by the independent consultant as one who suffered, or may suffer
financial injury in accordance with the August 29, 2011 OCC and FRB Guidance on Financial Injury or Other
Remediation. The independent consultant will also provide observations and recommendations to U.S. Bank
and the OCC designed to achieve the objectives of the notification process.
Pursuant to the OCC's guidance, the Foreclosure Review Services must include (i) all complaints received
through the borrower outreach process established per this guidance, and (ii) complaints received from
borrowers through any channel (directly by U.S. Bank, attorney generals, state banking agencies and all other
regulatory agencies) since April 13, 2011, that are regarding residential mortgage foreclosure actions that were
initiated, pending, or completed during the Review Period. Complaints for borrowers in active litigation must
be included if they are otherwise in-scope. All in-scope complaints received through the borrower outreach
process, from the launch of the outreach process (with a launch target date no later than September 30, 2011)
to the cut-off date (120 calendar days from the launch date), will be subjected to the Foreclosure Review
Services consistent with the terms above.
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USBK-EL-00000030
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The borrower outreach process is expected by the OCC to be a distinct, separate process from U.S. Bank's
existing customer service channel. U.S. Bank will employ a vendor ("Complaint Intake Vendor") to assist with
portions of the intake process, in line with the Coordinated Approach. The Complaint Intake Vendor will be
engaged by and work at the direction of U.S. Bank. PWC will have no contractual relationship with the
Complaint Intake Vendor. All complaints received through the borrower outreach process will be logged by
U.S. Bank or the Complaint Intake Vendor. Complaints filed through the borrower outreach process cannot
be excluded from remedies provided by the Foreclosure Review unless a determination is made that the
complaint is not in-scope, a process which will be subject to evaluation by the independent consultant as
further discussed below. The independent consultant will obtain from U.S. Bank and evaluate the reporting
to the OCC of the nature and resolution of each complaint received regarding (i) complaints received through
U.S. Bank's borrower outreach process, (ii) u.s. Bank's exclusions of complaints from the Foreclosure Review
and U.s. Bank's reason for exclusion, (iii) U.s. Bank's resolution of the complaint, and (iv) other data as
further described herein.
The general framework for the complaint process is outlined below:
Loan Population - U.s. Bank will be responsible for identifying the loans that are responsive to the
Consent Order and providing a detailed description of the process used to gather the data. PwC will
understand the process used by U.s. Bank to gather data related to such loans, and will perform
procedures designed to evaluate that process.
Notification Process / Borrower Communication
31 of 48
o In conjunction with the other servicers, U.s. Bank will design, develop and execute the
Coordinated Approach to notify the borrowers associated with the loans identified as
responsive to the Consent Order of their right to issue a complaint and the process for doing
so. At a minimum, this effort will include (1) direct mail to the best available address for
the borrowers, (2) address tracing and re-mailing to those borrowers for whom mail is
returned, (3) thorough tracing and reporting of all efforts used to reach borrowers, (4)
public advertising of the complaint process, to potentially reach those borrowers who are
not reachable through other means, and (5) through the use of internet websites.
o With respect to direct mail, the OCC's current guidelines are as follows: (1) mail
notifications will be subject to review by the OCC, (2), the OCC will contact state attorney
generals, the Department of Justice, and other federal regulatory agencies and invite them
to identify borrowers who filed a complaint with their office during the in-scope time
period, and to submit any of those complaints for evaluation and consideration as
appropriate, and (3) U.S. Bank will conduct outreach to neighborhood and not-for-profit
groups so that they may educate their constituents of the borrower complaint process.
Direct mailings will be conducted by the Complaint Intake Vendor in accordance with the
schedule and process outlined by the servicers' Coordinated Approach.
o With respect to advertisements, the OCC's guidelines are that the advertising will be
included in (1) national newspapers and/or prominent publications and (2) selected local
newspapers based on geographical concentration of relevant borrowers. Advertisements
will be designed and distributed in accordance with the schedule and process outlined by
the servicers' coordinated advertising approach.
USBK-EL-00000031
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o With respect to the internet channel and/or other advertising related matters, the acc's
current guidelines include the following: (1) a dedicated post office box to receive mailed
responses from borrowers, (2) a dedicated website within U.S. Bank's website domain
where borrowers can submit a complaint/claim on-line; the website will contain
information and processes for submission of complaints electronically with email
acknowledgement of receipt of the complaint, (3) outreach programs through the internet,
including email addresses, (4) consideration of the use of social media or social networks to
publicize the complaint process or to facilitate submission of a complaint, and (5) a
dedicated toll free number to be used by borrowers with complaints. The Coordinated
Approach will provide requirements for the website and an approach for the call center.
The website and the call center will be hosted by the Complaint Intake Vendor.
o U.S. Bank anticipates that certain direct mail to in-scope borrowers could be returned if the
borrower's mailing address was same as that of the related foreclosed property.
Accordingly, a skip tracing process is expected to be put in place to handle returned mail
and to trace the borrower's current address. It is required that the Complaint Intake
Vendor will execute this process. Related to return mail, the acc has the expectation that
(1) there will be a dedicated post office box for receiving returned mail, (2) the Complaint
Intake Vendor will use skip tracing methods to identify the borrower's current address, and
(3) multiple attempts will be made to locate and contact the borrower if communication is
returned. U.S. Bank will utilize a skip tracing process to be designed as part of the
Coordinated Approach.
o PwC will leverage the Advisory Process to assist management with U.S. Bank in providing
input on the design and development of the Coordinated Approach, U.S. Bank-specific
implementation of the Coordinated Approach, and the aspects of the complaint process that
are not covered by the Coordinated Approach, with respect to the notification process.
o The acc's expectations with respect to the content of the notification material will include
at a minimum, the following information: (1) why the borrower is being contacted, (2) how
eligibility for the notification/contact was determined, (3) necessary information that U.S.
Bank will need from the borrower upon response, (4) the channels available for the
borrower to contact U.S. Bank, (5) the timeframe for filing a complaint with U.S. Bank and,
(6) what to expect from the claims/complaint process, including when to expect a response.
o At the time of the writing of this engagement letter, it is required that U.S. Bank engage a
qualified third party vendor to assist in the execution of the notification process. Upon
engagement of the Complaint Intake Vendor, subject to the non-objection of the acc, pwc
will advise U.S. Bank on the acc guidance related to the borrower outreach process.
Claim/Complaint Support and Intake Process (i.e .. Receipt and Processing)
o In conjunction with the other servicers, U.S. Bank will develop and execute the Coordinated
Approach to receive the complaints and/or claims relevant to the Foreclosure Review, using
a Complaint Intake Vendor and U.S. Bank resources that are dedicated to this effort. At a
minimum, this effort will include (1) establishing the means for the borrowers to gain
320f48
USBK-EL-00000032
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clarity about their rights to make a complaint or claim via a website or mail, (2) providing a
structured intake process that will allow the borrower to categorize the nature of complaint
and provide relevant information and documentation to support the complaint, (3)
developing a plan for status reporting to those borrowers who make claims/complaints
through this process, (4) providing complete tracking and reporting of all contact with
borrowers relating to the Foreclosure Review effort, and (5) developing a means for all
claims/complaints received and supporting documents to be incorporated into the
Foreclosure Review.
o PwC will leverage the Advisory Process to assist management for u.s. Bank' in providing
input on the design and development of the Coordinated Approach, u.s. Bank-specific
implementation of the Coordinated Approach, and the aspects of the complaint process that
are not covered by the Coordinated Approach, with respect to handling inbound
complaints. The process will use the services of the Complaint Intake Vendor to receive
claim/complaint submissions, document and store such claims/complaints, filter the
nature/extent of the claims/complaints, forwarding/transferring the claims/complaints to
u.s. Bank for further analyses and a borrower follow-up process.
o PwC will advise u.s. Bank regarding training with respect to the execution of the
claim/complaint intake process. This training may include (1) key information to be
collected, (2) information on the forwarding / transferring of in-scope complaints from the
normal customer service process, and (3) relevant foreclosure complaint scripts, frequently
asked questions and/or other materials.
o u.s. Bank and the Complaint Intake Vendor will be responsible for executing the
claim/complaint intake process and providing updates and tracking to PwC, and
conducting its own procedures to test the process. The intake process should provide a
consistent set of questions to be answered by the borrowers including, but not limited to (1)
current contact information, (2) eligibility determination questions, (3) the specific nature
of the complaint, and (4) identification of any previous complaints by the borrower, where
applicable.
o PwC will evaluate the claim/complaint process and will provide observations and
recommendations to U.S. Bank and the acc to achieve the objectives of the
claim/complaint process. This may include (1) monitoring a judgmental sample of calls by
the customer service representatives to assess the appropriate handling of
claims/complaints, and providing feedback to the customer services representative team,
(2) assessing performance data such as call wait times and dropped calls to provide
information to help u.s. Bank determine the adequacy of technology resources and staffing
levels, and (3) providing recommendations to update scripts and procedures for continued
improvement of the claim/complaint process.
o u.s. Bank will also direct the Complaint Intake Vendor to provide updates and tracking to
PwC for purposes of PwC's analyses related to the Foreclosure Review Services.
o With respect to the complaint resolution process, all complaints will need to be logged by
u.s. Bank, including out-of-scope claims/complaints. For complaints received by the
33 of 48
USBK-EL-00000033
Privileged & Confidential Supervisory OCCInformation
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Complaint Intake Vendor, this vendor will forward all complaints to u.s. Bank. It is the
responsibility of u.s. Bank to evaluate whether the complaint is in-scope for the Review
Period and/or any immediate action is necessary with respect to the claim/complaint. u.s.
Bank will be responsible for assembling the documents necessary for the review of any in
scope complaints. u.s. Bank will then forward the in-scope complaints, a summary of u.s.
Bank's immediate actions, and the assembled documents to PwC for PwC's independent
assessment. PwC's assessment will be independent of any assessment previously prepared
by u.s. Bank. To the extent any immediate remedial action is required or desired by u.s.
Bank, such actions make be taken subject to subsequent independent evaluation by PwC
and any additional guidance for the Foreclosure Review remediation plan approved by the
acc.
o If the nature of the borrower inquiry does not pertain to in-scope mortgages/foreclosures,
such borrower contact will be transferred to u.s. Bank's existing customer service channels
via defined transfer/hand-off processes.
o u.s. Bank will be responsible for documenting and storing all complaints in a database that
will be archived per U.S. Bank's existing policies and a written acknowledgement is
expected to be provided to the borrower, within seven (7) calendar days of the receipt of the
complaint by the Complaint Intake Vendor.
Response
o All complaints are to receive a written response within the number of days indicated in the written
acknowledgement. In the written response, borrowers will be provided information that outlines
the results of the analysis that addresses all issues previously raised by the borrower. Ifthe results
of u.s. Bank's analysis determine that remediation is required, the borrower will be informed of this
in a written response and will state that a remediation is forthcoming within a specified time period
following approval by u.s. Bank.
o U.S. Bank and the Complaint Intake Vendor will be responsible for the infrastructure required to
handle the complaints, and it is the acc's expectation that the infrastructure would include
configuration of call center technology, web forms for complaints intake, and a database to
document complaints received.
o an a monthly basis, u.s. Bank will report to the acc, in a standardized format that includes loan
level information and aggregate volume tracking, the following data points: (1) number of
complaints received, (2) type or nature of complaints received, (3) number of complaints in-scope
and out-of-scope, (4) number of complaints acknowledged, (5) number of complaints in process, (6)
number of complaints not yet analyzed, (7) number of complaints responded to, (8) complaints
disposition, (9) number of complaints requiring remediation, (10) number of complaints
remediated, (11) aging reports as warranted/where applicable, and (12) a comments section to
provide other pertinent information, as applicable.
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USBK-EL-00000034
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Incornoration of Written Claims/Complaints into the Foreclosure Review Services of the Independent
Consultant
o For all claims/complaints received meeting the aforementioned criteria, PwC will perform only the
applicable Foreclosure Review procedure (a) - (h) as described above that is specific to the nature of
the borrower's claim/complaint and evaluate only that specific Consent Order requirement where
the nature/form of the claim/complaint is specific to a given Consent Order requirement. Ifthe
claim/complaint is not specific and/or multiple Consent Order requirements are specified in the
claim/complaint, an assessment of Foreclosure Review procedures (a) - (h) will be performed.
o In addition to the aforementioned assessment of the applicable Foreclosure Review Services
described above associated with in-scope claims/complaints, PwC will evaluate u.S. Bank's
processes for the categorization and/or filtering of in-scope versus out-of-scope claims.
o PwC will request any additional documents from u.S. Bank that may be necessary to complete the
Foreclosure Review Services related to the in-scope claims/complaints. u.S. Bank will be
responsible for gathering and/or assembling these documents for PwC's evaluation purposes.
o To the extent any patterns across claims/complaints that have been received are identified, PwC will
provide such observations to u.s. Bank and/or the OCC for further discussion purposes.
o PwC will incorporate the results of the applicable Foreclosure Review Services associated with the
received claims/complaints within the deliverables associated with this engagement.
o Quality assurance activities will be extended to the Foreclosure Review Services associated with the
received claims/complaints similar to the quality assurance activities related to the initial base and
risk-based sample determinations as previously discussed herein.
Any direct communication with the borrower will be conducted by u.S. Bank or the Complaint Intake Vendor.
Ancillary to the provision services described above, PwC will use the following "Advisory Process" to create the
documents that will be used by u.S. Bank specific to the claim/complaint process:
35 of 48
1. Where available, PWC will provide initial generic examples of the document based on initial understanding
of the objectives of the assignment.
2. PwC will meet with u.S. Bank management to discuss the sample document or the expected content of the
first draft of a document where no sample exists, to firm up PwC's understanding of the objectives, and to
discuss how the generic document should be adjusted/drafted to make it u.S. Bank specific. In the
discussions, PwC will utilize its experience and knowledge ofleading practices to facilitate u.S. Bank
management in making the decisions, determinations, etc. that u.S. Bank deems necessary for inclusion in
the document.
3. Following these discussion, PwC will revise the generic document as agreed with u.S. Bank management,
and/or create a first draft of a u.S. Bank-specific document for u.S. Bank management to review.
USBK-EL-00000035
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4. U.S. Bank management will take the initial draft, and apply its in-house expertise and experience to either
make those changes that they consider necessary or to provide comments/instructions to PwC regarding such
changes to be made by PwC.
5. PWC will analyze the amended deliverable or U.S. Bank's comments/instructions and make
observations/recommendations.
6. Based upon U.S. Bank management's decisions regarding PwC's observations/recommendations, PwC will
incorporate changes into the document.
7. U.S. Bank management will decide on the final content, adopt the document as its own and
approve/finalize.
Access to Information and Privileged Information
We understand that we will be required to execute a written agreement with the OCC providing for the OCC's prompt
and complete access to documents and information created by or in the possession of any of the parties with respect to
the Foreclosure Review. Pursuant to Section 607 of the Financial Services Regulatory Relief Act of 2006, 12 U.S.C.
1828(x) ("FSRRA) and applicable regulatory requirements, including the nondisclosure provisions of 12 C.F.R
4.32 and 4.36(b), to the extent that information and/or documents are provided by PwC, Gibson or U.S. Bank in
connection with the Foreclosure Review pursuant to an OCC request, the acc, pwc, Gibson and U.S. Bank do not
construe compliance with the acc request as waiving, destroying or otherwise affecting, in any manner or to any
extent, the protection of the attorney-client privilege, the attorney work product doctrine, or any other claim of
privilege or protection with respect to any person or entity other than the acc (''Third Party"). We also understand
that, consistent with the FSRRA and the agreement of the acc and U.S. Bank, to the extent that U.S. Bank shares with
PWC, Gibson and/or the OCC any information relating to the Foreclosure Review, including communications between
and among U.S. Bank and counsel other than Gibson ("ather Counsel") and/or any documentation prepared by Other
Counsel, U.S. Bank does not intend to waive or otherwise affect, and is not waiving or otherwise affecting, in any
manner or to any extent, the protection of the attorney-client privilege, the attorney work product doctrine, or any
other claim of privilege or protection with respect to any Third Party.
The information and documentation that PwC provides to the OCC in connection with the Foreclosure Review,
including the Foreclosure Report, Gibson's legal advice and conclusions, and PwC's workpapers only are being
provided to the acc for the purpose of fulfilling the requirements of the Foreclosure Review and to facilitate the
acc's supervisory responsibilities.
It is our understanding that the OCC will maintain requested information and documentation as confidential, non
public OCC information under applicable rules and regulations, including 12 C.F.R 4.32 and the non-disclosure
provisions of 12 C.F.R 4.32 and 4.36(b), and that it will not disclose such information or documentation to any
Third Party, except to the extent that the acc determines that the release or disclosure of the information or
documentation is required by law.
Should the acc receive a subpoena or other request for information or documentation from another governmental
authority or other Third Party, it is our understanding that the acc will review the request for access to such
information or documentation in accordance with the requirements of the OCC's applicable rules, including 12 C.F.R
Part 4.
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Should U.S. Bank and/or U.S. Bank's external counsel receive a governmental or Third Party subpoena for such
information, U.S. Bank will notify PwC, PwC's external counsel, and Gibson so that these parties may act to protect
any claim of privilege with respect to such information. Should PwC and/or PwC's external counsel receive a
governmental or Third Party subpoena for such information, PWC will notify U.S. Bank, U.S. Bank's external counsel,
and Gibson.
Progress Reporting and Communications with the OCC
We understand that the OCC will want to receive periodic updates throughout the timeIine of this engagement with
respect to the progression of the Foreclosure Review Services discussed herein as it relates to the initial base sample
and risk-based sample populations, the post-Consent Order claim/complaint process and/or other specific aspects of
this engagement. These updates are likely to be facilitated through the use of written updates as well as through in
person meetings between the OCC and PwC. As previously indicated in the Independence ofPwC as Independent
Consultant section of this engagement letter, we understand that the conduct of the Foreclosure Review Services shall
be subject to the monitoring, oversight and direction of the OCC. PwC agrees to promptly comply with all written
comments, directions and instructions ofthe OCC concerning the conduct ofthe Foreclosure Review Services
consistent with professional standards, and that it will promptly provide any documents, workpapers, materials or
other information requested by the OCC. Additionally, PwC agrees to provide regular progress reports, updates and
information concerning the conduct of the Foreclosure Review Services to the OCC, as directed by the OCC.
Upon approval of the engagement letter by the OCC, PwC will commence meetings with the OCC regarding the form,
nature, extent and frequency of the progress reporting and regular communications with the OCC.
Additionally, the progress reporting that PwC will provide to U.S. Bank at regular intervals throughout the course of
the Foreclosure Review will also be made available for the OCC as part of the OCC's review and oversight of this
engagement.
Deliverables
We expect to provide you with DeIiverables prepared for and delivered to you under this Agreement,
including the following: PWC will prepare a written report detailing the observations of the engagement
("Foreclosure Report"). It is expected that immediately upon completion, the Foreclosure Report will be
submitted to the Deputy Comptroller, Examiner-in-Charge, and the Company's Compliance Committee of its
Board of Directors. We will make any workpapers associated with the Foreclosure Review available to the
OCC upon its written request, which PWC understands will be non-public OCC information and subject to the
OCC's nondisclosure provisions, including 12 C.F.R 4.32, 4.36 and 4.37, and its customary examination
privilege, and that the provision of such materials to the OCC will not waive any privilege or related defense
with respect to Third Parties.
You will own all Deliverables except as follows: we own our working papers, preexisting materials and any
general skills, know-how, processes, or other intellectual property (including a non-U.S. Bank specific version
of any Deliverables) which we may have discovered or created as a result of the Services. You have a
nonexclusive, non-transferable license to use such materials included in the Deliverables for your own
internal use as part of such DeIiverables.
In addition to Deliverables, we may develop software or other electronic tools to assist us with an
engagement. Ifwe make these available to you, they are provided "as is" and your use of these tools is at your
own risk.
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Notwithstanding anything to the contrary in this Agreement, you shall retain ownership of all of your own
materials, proprietary information and intellectual property, including such materials, proprietary
information or intellectual property used in connection with the Foreclosure Review or in the creation of the
Foreclosure Report or other DeIiverables, and we shall not obtain any right, title or interest in such materials,
proprietary information or intellectual property.
Use ofDeIiverables
PwC is providing the Services and Deliverables solely for your use and benefit pursuant to a client relationship
exclusively with you. The Services and Deliverables are not intended for a third party's use, benefit or reliance
and PwC disclaims any contractual or other responsibility or duty of care to others based upon these Services
or Deliverables or advice we provide. You shall not discuss the Services with or disclose Deliverables to any
third party, or otherwise disclose the Services or Deliverables without PwC's prior written consent.
Notwithstanding anything to the contrary in this Agreement, you may discuss the Services and/or disclose the
Deliverables to (i) relevant regulatory bodies with jurisdiction over you, including the OCC, or (ii) your
independent counsel retained in connection with the Consent Order without PwC's prior written consent. The
Company may provide the Deliverables to the relevant regulatory bodies, including the OCC, which will be
granted full and timely access to PwC's related workpapers upon written request. We understand that the
Deliverables and any other information or documentation that is provided to the OCC in connection with the
Foreclosure Review will be non-public OCC information and subject to the OCC's nondisclosure provisions,
including 12 C.F.R 4.32, 4.36 and 4.37, and the customary examination privilege of the OCC, and, to the
extent that the Deliverables or any other information or documentation are provided to any other relevant
banking regulatory agency with jurisdiction over u.S. Bank, that the Deliverables, information and
documentation will be subject to the nondisclosure provisions of that relevant banking regulatory agency,
including, but not limited to, the Federal Reserve Board (e.g., 12 C.F.R 261.2 and 261.22) and the Federal
Deposit Insurance Corporation (e.g., 12 C.F.R 309.2, 309.5, and 309.6). We also understand that,
pursuant to the FSRRA, the provision of the Deliverables and any other information or documentation to the
OCC or another relevant banking regulatory agency is not intended to waive, destroy or otherwise affect, and
does not waive, destroy or otherwise affect, in any manner or to any extent, the protection of the attorney
work doctrine, the attorney client privilege or any other claim of privilege or related defense that can be
asserted by u.S. Bank with respect to any Third Party.
You may disclose any materials that do not contain PwC's name or other information that could identify PwC
as the source (either because PwC provided a Deliverable without identifying information or because you
subsequently removed it) to any third party if you first accept and represent them as its own and you make no
reference to PwC in connection with such materials.
u.S. Bank shall indemnify PwC and the Beneficiaries (as defined below) against all third-party claims
(including, without limitation, claims by Gibson) and damages arising from or relating to the Services or
Deliverables, except to the extent finally determined to have resulted from PwC's gross negligence or
intentional misconduct relating to such Services and/or Deliverables.
Timeline
Pursuant to the terms of the Consent Order, within 45 days of the issuance of the Consent Order, U.S. Bank
will retain an independent consultant acceptable to the Deputy Comptroller and the Examiner-in-Charge to
conduct the Foreclosure Review. Within 15 days of the engagement of the independent consultant, but prior
to the commencement of the Foreclosure Review, U.S. Bank will submit to the Deputy Comptroller and
Examiner-in-Charge, the engagement letter of the independent consultant for approval. Completion of the
Foreclosure Review is required within 120 days from approval of the engagement letter. The independent
consultant shall prepare a written report detailing the findings of the Foreclosure Review which is to be
completed within 30 days of the completion of the Foreclosure Review. Within 45 days of the submission of
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the written report to the OCC, u.s. Bank shall submit a plan, acceptable to the OCC, to remediate all financial
injury to borrowers caused by any errors, misrepresentations, or other deficiencies identified in the written
report. Within 60 days after the OCC provides supervisory non-objection to the plan to remediate all
financial injury to borrowers, u.s. Bank shall make all reimbursement and remediation payments and provide
all credits required by such plan, and provide the OCC with a report detailing such payments and credits.
Completion of the initial samples for the Foreclosure Review Services as described above is currently
anticipated within approximately 90 days of the approval of the engagement letter, with acknowledgment that
additional sampling may be required based on the results ofthe initial samples. The entire Foreclosure
Review will be completed not later than 120 days after the OCC's approval of the engagement letter and/or
within an appropriate timeframe pursuant to the OCC-specified commencement and closure of the complaint
process described herein.
Our ability to perform the Services within the proposed timeline may be impacted by the sample size, u.S.
Bank's ability to provide the necessary, complete and accurate documentation and information in a timely
manner, and the ability of independent legal counsel to complete the relevant legal analysis and provide the
legal conclusions that may be required for PWC to complete its performance of the Services. In the event that
we anticipate that our timelines will be impacted we will notify you immediately.
Confidentiality
"Confidential Information" means non-public information that a party marks as "confidential" or
or that otherwise should be understood
expense structure, are considered
'-VJLIU'..l"l1LMll. Confidential Information does not any information which (i) is rightfully known to the
recipient prior to its disclosure; (ii) is released to any other person or entity (including governmental
agencies) without restriction; (iii) is independently developed by the recipient without use of or reliance on
Confidential Information; or (iv) is or later becomes publicly available without violation of this Agreement or
may be lawfully obtained by a party from a non-party. All parties will protect the confidentiality of
Confidential Information that it receives from the other parties, except as required by applicable law, statute,
rule, regulation or professional standard, and will not disclose or use such Confidential Information without
the other parties' prior written consent. If disclosure is required by law, statute, rule or regulation (including
any subpoena or other similar form of process), or by professional standards, the party to which the request
for disclosure is made shall (other than in connection with routine supervisory examinations by regulatory
authorities with jurisdiction over the party and without breaching any legal or regulatory requirement)
provide the other parties with prior prompt written notice thereof and, if practicable under the circumstances,
allow the other parties to seek a restraining order or other appropriate relief. All Confidential Information
will also be treated in accordance with Exhibit A.
Your Responsibilities
Our role is advisory only. You are responsible for all management functions and decisions relating to this
Agreement, including evaluating and accepting the adequacy of the scope of the Services in addressing your
needs. You are also responsible for the results achieved from using the Services or Deliverables, and it is your
responsibility to establish and maintain your internal controls. You will designate a competent member of
management to oversee the Services. We expect that you will provide timely, accurate and complete
information and reasonable assistance, and we will perform the engagement on that basis. In addition:
The Company and/or its independent legal counsel will make available the relevant criteria for the
evaluation (e.g., federal, state and local laws) during the first week of the engagement.
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The Company will provide all necessary population information in order to identify and facilitate
sample selections. The Company is responsible for the integrity of the population files used to
identify all samples.
For those foreclosure actions selected in the samples, the Company will provide all documentation
necessary to evaluate the action against the criteria - and such documentation will be accurate and
complete in all material respects.
The Company is responsible for the accuracy of all data provided to PwC as part of this engagement
as well as the accuracy of any data embedded within the source systems that generate information
provided to PwC as part of this engagement.
The Company is responsible for any potential resolution of observations identified as part of the
engagement.
The Company will provide sufficient facilities and computing resources for PwC to execute their
assigned tasks. This may include, but is not limited to, computers, desks, telephones and networking
facilities.
All assessments will assume that the documentation presented to the PwC team prior to the
initiation of work efforts is the only available documentation, except as otherwise agreed to by the
parties. All assessments will be performed based on the point in time of the initiation of our
Foreclosure Review Services.
PwC's Team Structure and Industry Experience
The team that PwC will commit to this engagement has a combination of knowledge and experience with mortgage
servicing, default management and, in particular, foreclosures. Additionally, the PwC engagement team will be
complemented with resources with significant experience in the evaluation of mortgage servicers' compliance with a
variety of previously established industry servicing criteria - including but not limited to loss modification programs
(e.g., Regulation AB, the Uniform Single Attestation Program ("USAP"), HUD, etc.).
The overall leaders of the PwC team will include the following individuals:
Senior Manger
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The aforementioned engagement team leaders will be supplemented with various other partner, senior
manager/managing director, and/or manager/director level resources as considered necessary given the
scope and complexity of the procedures to be performed as outlined within this engagement letter. Any work
performed by staff associates with respect to the Foreclosure Review Services will be subject to a first-level
review by a designated senior associate team member. An additional, second-level review of any significant
findings, unique and/or unusual facts, significant follow-up items and/or potential identified
observations/differences that are summarized within the first-level review will be performed by a senior
manager/managing director or manager/director level PwC team member.
Further quality assurance activities of the PwC team will include, but not necessarily be limited to the
following: (1) a standardized on-boarding program for every team member who participates on the
engagement, (2) use of standardized templates that are customized at an individual state level that will be
utilized consistently throughout the initial base and risk-based sampling activities, (3) groupings of the PwC
team members (including the senior associate and manager resources) at a state level to promote consistency,
efficiency and effectiveness of the completion of the customized state level templates, and (4) regular team
meetings focused on various aspects of the engagement including work product considerations, e.g.,
documentation, issue resolution, etc.
Fees and Expenses
Our fees are based on the time required by our professionals to complete the engagement. Individual hourly
rates vary according to the experience and skill required. PwC's fees are based on the time required by the
individual specialists assigned to the engagement. Our fees for the above work will be billed on a time and
materials basis which will not exceed the following rates:
Level
PwC also will bill you for our reasonable out-of-pocket expenses, any applicable sales, use or value added tax,
and internal per-ticket charges for booking travel. Invoices are due within 30 days of the invoice date.
Reasonable out-of-pocket expenses will include any fees and/or related reasonable out-of-pocket expenses of
PwC's external counsel to be engaged and/or any other professional advisors deemed necessary to meet the
OCC guidance as described within the Consent Order and/or related verbal and written guidance.
Overall fees associated with this engagement are dependent upon multiple key variables including but not
limited to the following: overall sample sizes, extent of Consent Order guidance to be assessed for all sample
sizes (including both the initial base sample and the risk-based sample determinations), the hours required to
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complete the Consent Order requirement file assessment for any given sample, the volume of
claim/complaint activity associated with the post-Consent Order complaint process, and the number of PwC
team members involved with the engagement.
Preliminary estimates of sample sizes are included in this engagement letter where possible for both the
initial base sample and risk-based sample determinations. Likewise, preliminary indications of which
Consent Order requirements are in-scope for the initial base sample and risk-based sample determinations
are also included in this engagement letter. Complaint volume expectations are currently unknown and will
be determined upon commencement of the activities previously discussed within this engagement letter.
Based on the mUltiple variables described above and to complete the activities contemplated within this
engagement letter within u.s. Bank's desired timeline, PwC staffing levels could vary significantly but will
likely be in excess of 150 team members for a substantial portion of fieldwork.
The aforementioned estimates are for the initial base sample and initial risk-based sample determinations
only. If supplemental sampling is required as a result of the initial findings, the fees associated with such
additional sampling will be estimated based on the incremental number of files/additional samples to be
evaluated, the Consent Order requirements applicable to the supplemental samples and expectations specific
to the hourly effort to complete the assessment of the supplemental samples.
Termination and Dispute Resolution
Any party to this Agreement may terminate the Services by giving written notice to that effect. Subject to the
provisions of Exhibit A, upon termination each party will return or irretrievably destroy all Confidential
Information of the other party that it has in its possession, including any information stored on its own
equipment, and upon request provide the other party with a certificate attesting the destruction.
Notwithstanding anything to the contrary in this Agreement or Exhibit A, PWC may keep its working papers,
and such copies of the Deliverables and u.s. Bank's Confidential Information to comply with its document
retention policies or in accordance with applicable law, rule, regulation or professional standards. Any copies
of U.S. Bank's Confidential Information so kept shall be retained in accordance with the terms of this
Agreement. Further, the parties will work to ensure the termination of Services or transfer of Services to
another service provider selected by u.S. Bank (which may include u.S. Bank) is orderly and is non-disruptive
to the business continuation of each party. Notwithstanding the foregoing, if u.S. Bank terminates the
Agreement without cause, U.S. Bank will remain obligated to pay for all undisputed fees and expenses
incurred prior to the effective date of termination. PwC will furnish to U.S. Bank the latest version of any
work product in progress upon the effective date of termination, in the format mutually agreed to by the
parties. u.S. Bank acknowledges and agrees that any such drafts or works in progress are provided "as is" and
are solely for u.S. Bank's convenience. PwC expressly disclaims any and all responsibility and liability with
respect to any drafts or works in progress provided to u.S. Bank, and such drafts or works in progress may
not be relied upon or attributed to PwC unless PwC specifically reduces such draft to a final writing.
Any unresolved dispute relating in any way to the Services or this Agreement shall be resolved by arbitration.
The arbitration will be conducted in accordance with the Rules for Non-Administered Arbitration of the
International Institute for Conflict Prevention and Resolution then in effect. The arbitration will be conducted
before a panel of three arbitrators. The arbitration panel shall have no power to award non-monetary or
equitable relief of any sort. It shall also have no power to award damages inconsistent with the Limitations of
Liability provisions below. Judgment on any arbitration award may be entered in any court having
jurisdiction. All aspects of the arbitration shall be treated as confidential. You accept and acknowledge that
any demand for arbitration arising from or in connection with the Services must be issued within one year
from the date you became aware or should reasonably have become aware of the facts that give rise to our
alleged liability and in any event no later than two years after any such cause of action accrued.
This Agreement and any dispute relating to the Services will be governed by and construed, interpreted and
enforced in accordance with the laws of the State of New York, without giving effect to any provisions relating
to conflict of laws that require the laws of another jurisdiction to apply.
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Limitations on Liability
Other PwC Firms
PWC is the u.s. firm of the global network of separate and independent PricewaterhouseCoopers firms
(exclusive of PwC, the "Other PWC Firms"). PWC may draw on the resources of and/or subcontract to its
subsidiaries, the Other PwC Firms and/or third party contractors and subcontractors (each, a "PWC
Subcontractor"), in each case within or outside of the United States in connection with the provision of the
Services and/or for internal, administrative and/or regulatory compliance purposes. Notwithstanding
anything to the contrary in this Agreement (including Exhibit A hereto), U.S. Bank agrees that PwC may
provide information PWC receives in connection with this Agreement to the PwC Subcontractors for such
purposes. PwC will be solely responsible for the provision of the Services (including those performed by the
PwC Subcontractors) and for the protection of the information provided to the PWC Subcontractors. The PwC
Subcontractors and the respective partners, principals and employees of PwC and the PwC Subcontractors
(collectively the "Beneficiaries") shall have no liability or obligations arising out of this Agreement. U.S. Bank
agrees to: (a) bring any claim or other legal proceeding of any nature arising from the Services against PWC
and not against the Beneficiaries; and (b) ensure or procure that any affiliates or subsidiaries of U.S. Bank
that receive or benefit from the Services hereunder (collectively, "your Subsidiaries") do not assert any such
claim or other legal proceeding against PWC or the Beneficiaries. Ifany of your Subsidiaries receive Services
or the benefit of the Services under this Agreement, U.S. Bank agrees to provide a copy of this Agreement to
your Subsidiaries, and U.S. Bank will notify them that although the Beneficiaries may interact with them, the
delivery of the Services is governed by the terms of this Agreement (including the liability limitations herein),
and your Subsidiaries should notify U.S. Bank of any disputes or potential claims arising from the Services.
While PwC is entering into this Agreement on its own behalf, this section also is intended for the benefit of the
Beneficiaries.
Other Matters
PwC is owned by professionals who hold CPA licenses as well as by professionals who are not licensed CPAs.
Depending on the nature of the Services we provide, non-CPA owners may be involved in providing services
to you now or in the future.
No party to this Agreement may assign or transfer this Agreement, or any rights, obligations, claims or
proceeds from claims arising under it, without the prior written consent of the other parties, and any
assignment without such consent shall be void and invalid. If any provision of this Agreement is found to be
unenforceable, the remainder of this Agreement shall be enforced to the extent permitted by law. If we
perform the Services prior to both parties executing this Agreement, this Agreement shall be effective as of the
date we began the Services. You agree we may use your name in experience citations and recruiting materials.
This Agreement supersedes any prior understandings, proposals or agreements with respect to the Services,
and any changes must be agreed to in writing through an amendment to this Agreement or a change order.
By entering into this Agreement, you are binding your Subsidiaries to the extent that you have the authority to
do so. We disclaim any contractual or other responsibility or duty of care to any other subsidiaries or
affiliates.
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*****
We are pleased to have the to you. If you have any questions about this Agreement,
please discuss them Ifthe SerVices and terms outlined in this Agreement are
acceptable, please sign
Very truly yours,
ACKNOWLEDGED AND
u.s. Bank National Association
Signature of client official:
Please print name:
Title:
Date:
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Exhibit B - Pennissible Fees
U.S. Bank has retained outside counsel to identify all potential state legal requirements or limitations
associated with fees potentially charged at any time during the foreclosure proceeding. Counsel has identified
those fees on a state-by-state basis, and this information will be utilized in performing the Foreclosure Review
Services discussed herein. These potential fees include:
advertising / publication fee
appraisal / BPO costs
attorneys' fees
copying costs
court / filing fees
statutory mailing costs
mailing / courier fees
NSF fees
posting notice of default / sale
postponement fee
process / service / summons fee / costs.
property inspection fees
property preservation fees
recording / reconveyance fees
rescission fees
sale fees
sheriffs fees for conducting sale
sheriffs fees for securing property
skip trace fees
title / deed costs
trustee fees
trustee sale guarantee ("TSG") fees / title elimination fees
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CONFIDENTIAL AND PRIVILEGED: PREPARED IN RESPONSE TO OCC CONSENT ORDER (AA-EC-1l-13), dated
April 13, 2011; SUBJECT TO CONFIDENTIAL TREATMENT PURSUANT TO 5 U.S.C. 552(b); 12 C.F.R 4.12
(b)(4), 4.12 (b)(8)
September 23,2011
ork 10022
Re: Article VII Foreclosure Review
This engagement letter (the "Agreement") confirms that Citibank, N.A., Las Vegas, Nevada and its mortgage servicing
subsidiary, CitiMortgage, Inc. (collectively, "You", "Citibank" or "the Bank"), in compliance with certain requirements
set forth in the consent order (the "Consent Order"), dated April 13, 2011, received from the Office of the Comptroller
of the Currency ("OCC"), has engaged PricewaterhouseCoopers LLP ("we" or "us" or "PwC") to perform the services
described below.
Background
Under Article VII of the Consent Order, Citibank is required to engage an independent consultant acceptable to the
OCC to conduct an independent review of certain residential foreclosure actions regarding individual borrowers \-'lith
respect to Citibank's residential loan portfolio and servicing portfolio. This review, as contemplated by the Standards
(as defined below), will include residential foreclosure actions or proceedings (including foreclosures that were in
process or completed) for loans serviced by Citibank and brought in the name of Citibank, the investor, the mortgage
note holder, or any agent for the mortgage note holder (including the Mortgage Electronic Registration Systems
("MERS")), that have been pending at any time from January 1, 2009 to December 31,2010 (the "Review Period"), as
well as residential foreclosure sales that occurred during the Review Period and will address the requirements set
forth in paragraph 3(a) through 3(h) of Article VII of the Consent Order (the "Consent Order Requirements") (the
"Foreclosure Review").
This Agreement, which is subject to OCC approval, is intended to outline an engagement approach that determines
the following:
and
In setting the scope and review methodology under clause (i) of this sub-paragraph, we may consider any work
already done by Citibank or other third-parties on behalf of Citibank. This Agreement also contains a full
description ofthe statistical methods chosen, as well as procedures to increase the size of the sample depending
on the results of the initial sampling.
included in PwCTeam
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(c) Completion of the review of the initial sample for the Foreclosure Review within approximately 120 days
("Foreclosure Review Fieldwork Period"), but additional sampling may be required based on the results of the initial
review, and the Foreclosure Review report will be completed no later than 30 days after the completion of the
Foreclosure Review Fieldwork Period. A proposed timeline is included in the Timeline section below.
Scope of Our Services & Responsibilities
You are engaging us to provide the professional consulting services outlined below (the "Services"). We are not
providing, and shall at no time provide, any legal advice or legal opinions in connection with this engagement. PwC
makes no representations regarding questions oflega! interpretation. The Bank should consult with its external
counsel with respect to any legal matters or items that require legal interpretation, under federal, state or other type
oflaws or regulations, in connection with this engagement or otherwise.
As provided for by the OCC, the Bank wishes to engage PwC as one of its independent consultants to conduct an
independent review of certain residential foreclosure actions. Because of PwC's role as independent consultant, the
Bank will not attempt to direct or influence PwC's factual observations or findings that result from the Foreclosure
Review. The Bank's further responsibilities in connection with this Agreement will be as set forth in the "Your
Responsibilities" section hereunder, or as otherwise mutually agreed by the parties.
PwC understands that the Bank also will retain an independent outside counsel ("Independent Counsel") to provide
legal representation with respect to the Consent Order or legal advice concerning matters covered by the Consent
Order. PwC further understands that Independent Counsel will provide the legal advice necessary for completion of
the items listed in Paragraphs 3(a)(i) - (vii) of the Consent Order (the "Review Criteria"). The Bank ensures that
Independent Counsel will share legal guidance with PwC as may be necessary in connection with PwC's provision of
Services hereunder.
This Agreement does not cover, and the definition of "Services" does not include, the services that will be provided by
Independent Counsel, as those services will be covered by a separate agreement between the Bank and Independent
Counsel. Although PwC may utilize certain information or materials prepared by Independent Counsel in order to
provide the Services hereunder, PwC disclaims any and all responsibility and liability for any such materials,
information or data provided by the Bank or Independent Counsel in connection with this engagement. PwC will
refer any potential matters oflegal interpretation to Independent Counsel. PwC understands, and the Bank agrees,
that the Foreclosure Review, any documentation created in connection with the Foreclosure Review, and any
communications between and among PwC, the Bank, and Independent Counsel will not be subject to a claim by the
Bank of protection under the attorney-client privilege or under the work-product doctrine.
PwC will provide a written report detailing its factual observations and findings from the Foreclosure Review (the
"Foreclosure PwC understands that Counsel will prepare a separate written report that sets
forth the called Order.
Institute of Certified Public Accountants
or other form of assurance, and will not
nrc'Fltl"" to us Citibank's
PwC agrees to use best efforts so that its Services in connection ~ i t h the Foreclosure Review comply with all
applicable requirements set forth in Article VII of the Consent Order issued to the Bank on April 13, 2011, and that it
will conduct the Foreclosure Review as separate and independent from any review, study, or other work performed by
the Bank or its contractors or agents with respect to the Bank's mortgage servicing portfolio or the Bank's compliance
with other of the Consent as set forth below:
CITI-EL-00000002
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1. As previously indicated, Citibank will not attempt to direct or influence PwC's factual observations or
findings that result from the Foreclosure Review. PWC shall immediately notify the OCC of any effort by the Bank,
directly or indirectly, to exert any such direction, control, supervision, oversight, or influence over PwC.
2. PwC agrees that it is responsible for the conduct and results of the factual review and factual findings
required by the Foreclosure Review, in accordance with the requirements of Sections 3(a) through (h) of Article VII of
the Consent Order that do not require legal determinations or analyses. As previously indicated, PwC understands
that Independent Counsel will prepare a separate written report that sets forth the legal conclusions that are called for
by the requirements of Article VII of the Consent Order, which report shall be based upon the report provided to
Citibank by PwC. PwC understands that engagement of such Independent Counsel by Citibank is subject to OCC
approval.
3. The conduct of the Foreclosure Review shall be subject to the monitoring, oversight, and direction of the
OCC. PwC agrees to promptly comply with all written comments, directions, and instructions of the OCC concerning
the conduct of the Foreclosure Review consistent with professional standards, and that it will promptly provide any
documents, workpapers, materials or other information requested by the OCC, without waiver of any claim of
privilege or confidentiality.
4. PwC agrees to provide regular progress reports, updates and information concerning the conduct of the
Foreclosure Review to the OCC, as directed by the OCC.
5. PwC ""ill conduct the Foreclosure Review using only personnel employed or retained by PwC to perform
the work required to complete the Foreclosure Review. PwC shall not employ or use services provided by Bank
employees, or contractors or agents retained by the Bank with respect to the Consent Order or with respect to matters
addressed in the Consent Order, in order to conduct the Foreclosure Re\iew, except where the OCC specifically
provides prior written approval to do so.
6. Subject to the requirements and restrictions of no. 5 above, including the requirement of specific approval
by the OCC, PwC may utilize documents, materials or other information provided by the Bank, and may communicate
""ith the Bank, its contractors or agents, in order to conduct the Foreclosure Review.
7. PwC agrees that any legal advice needed in conducting the Foreclosure Review shall be pro\ided by
Independent Counsel whose retention for that purpose has been approved by the OCC. PwC agrees not to obtain legal
advice (or other professional services) in conducting the Foreclosure Review from the Bank's inside counsel, or from
outside counsel retained by the Bank or its affiliates to provide legal advice concerning the Consent Order or matters
contained in the Consent Order.
in its sole that PwC has not been standards
direct the Bank to dismiss PwC and retain a successor case the Bank
PwC than up Bank.
As noted the Foreclosure Review will include residential foreclosure actions or (including
foreclosures that were in process or completed) for loans serviced by Citibank and brought in name of Citibank,
the investor, the mortgage note holder, or any agent for the mortgage note holder (including MERS), that were
pending at any time during the Review Period, as well as the residential foreclosure sales that occurred during the
Review Period. The scope of our review is to perform the Consent Order Requirements below on a sample of loans
from the population described below. The sampling methodology and procedures for addressing the Consent Order
Requirements are outlined below.
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Citibank foreclosure actions on loans serviced by others on behalf of Citibank or for which Citibank's only role is as
trustee will be considered outside of the scope of the Foreclosure Review.
Interviews and Procedure Reviews
PwC will use the following process to review Citibank's procedures related to foreclosures to assist with the
completion of the Foreclosure Review, including:
_
with subject matter experts (SMEs) on Citibank's Loss Mitigation Team in _and
to assist in the review of Citibank's loss mitigation efforts
Review of Citibank's proprietary loss mitigation / loan modification evaluation tool
understand general functionality and applicability to loss mitigation and loan mc,dlltIc2ltioln
to
Review of Citibank's main servicing systems to understand functionality,
applicability to Citibank's proprietary workflows, and how to correctly review system notes
Review of Citibank's loss mitigation / collections servicing system"to understand functionality,
applicability to Citibank's proprietary workflows, and how to correctly review system notes
Interviews with key SMEs in Citibank's default management area in both_and to
understand processes and workflows in the handling of foreclosures
Interviews with Citibank's legal team to obtain their perspective on applicable laws and fees in force at the
time the foreclosure was conducted
Interviews with Citibank data experts to understand composition of the CitiMortgage and CitiFinancial
foreclosure files and processes and parameters used to create the file
Interviews with the Executive Response Unit (ERU) to understand the customer complaint process
Follow-up interviews as needed to resolve any questions identified during the interviews or procedure
reviews
Validation of Citi's proprietary NPV calculations using comparisons with the Treasury models
In addition, we understand that the methodology for conducting the Foreclosure Review should include a process for
submission and review of borrower claims and complaints - specifically focused on complaints received by Citibank
subsequent to the issuance of the Consent Order on April 13, 2011 that are from borrowers who believe they have
experienced financial injury as a result of errors, misrepresentations, or other deficiencies associated with
foreclosures initiated or completed during the Review Period. Additional details associated with the proposed
Foreclosure Review surrounding Order received Citibank are included below.
nnlVH1Pfl in the Comptroller'S
sampling, specifically numerical
sampling, will be to determine to each of the requirements set forth in the Consent Order.
Pursuant to the Handbook, with numerical sampling, each item in a given population is equally likely to be drawn and
the population to be sampled is defined by the number of items. Numerical sampling is used to reveal the presence
(or absence) of a defined characteristic in a portfolio of items with similar characteristics.
As further discussed in the Handbook, in numerical sampling, a
differences can be tolerated in the the more
limit is set by deciding how many
that can be tolerated, the the
CITI-EL-00000004
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Based on the guidance contained in the Handbook, as well as communications from the OCC, the sample sizes to be
utilized for assessing the requirements set forth in the Consent Order will be determined assuming a precision level of
3% and a reliability level of 95%. This corresponds to a sample size of 100 for a large population such as Citibank's
population (in some high risk segments, the sample size will be determined assuming 2% precision and 95%
confidence which corresponds to a sample size of 150). In order for the sample to address a number of foreclosure
characteristics, including guidance from the OCC, the sample will be supplemented with a number of sub-samples
with the following characteristics (discussed below in Defined Populations - Risk Based Sample Determinations):
1. SCRA cases;
2. Customer complaints referred by state and federal agencies regarding foreclosure issues;
3. Foreclosure sales during 2009 and 2010 that occurred when there is an indication that the borrower was in
active bankruptcy protection;
4. Top foreclosure activity states during 2009 and 2010;
5. Top foreclosure sales states during 2009 and 2010;
6. Foreclosure referrals at the time when the borrower was already in active bankruptcy protection;
7. Foreclosure referrals for which a bankruptcy protection notification has been received at any time during the
process;
8. Non-judicial States;
9. LawOffices_
10.
11.
12. Large volume foreclosure firms;
13. Other third party vendors;
14. Document execution service providers;
15. Rescinded foreclosures;
16. Mortgages that were foreclosed when an application was pending for loan modification or loss mitigation;
17. Loans not in default for a sufficient period of time to authorize foreclosure;
18. Denied HA1\iP;
Failed HAMP;
21. Failed proprietary
22. Borrowers with debt cancellation from
23. "Pyramiding fees" fees assessed prior to delinquency precipitating foreclosure;
24. Loans with Customer Complaints received from January 1, 2009 - April 13, 2011; and
25. CitiFinancial Loans.
CITI-EL-00000005
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PWC understands that the following is a list of the top 10 States and New Jersey with the highest foreclosure activity
volume for Citibank during 2009 and 2010 (which represents approximately 63 percent of Citibank's foreclosure
volume):
Foreclosure Cummulative
State Activity Percent Percent
Florida 43,889 12.27% 12.27%
California 30,921 8.64% 20.91%
Michigan 25,283 7.07% 27.98%
Texas 21,667 6.06% 34.04%
Ohio 20,452 5.72% 39.75%
Illinois 19,667 5.50% 45.25%
Georgia 15,735 4.40% 49.65%
New York 15,594 4.36% 54.01%
Arizona 12,599 3.52% 57.53%
Indiana 10,340 2.89% 60.42%
New Jersey 8,175 2.29% 62.71%
All Other 133,410 37.29% 100.00%
Total 357,732 100% 100.00%
PwC understands that the following is a list of the top 10 States and New Jersey with the highest foreclosure sales
volume for Citibank during 2009 and 2010 (which represents approximately 63 percent of Citibank's foreclosure sale
volume):
Foreclosure Cummulative
State Sales Percent Percent
Michigan 12,076 11.05% 11.05%
California 10,091 9.23% 20.28%
Florida 7,853 7.18% 27.47%
Texas 7,221 6.61% 34.07%
Georgia 6,816 6.24% 40.31%
Ohio 5.79'% 46.10%
Arizona 51.81"/"
Illinois 4.61'% 56.42%
Missouri 3.15% 59.57%,
Minnesota 3.10% 62.66%
New Jersey 514 0.47% 63.13%
All Other 40,293 36.87% 100.00%
Total 109,298 100.00% 100.00%
CITI-EL-00000006
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Defined Populations - Risk Based Sample Determinations
In order that the Foreclosure Review provides coverage across a number of foreclosure characteristics, a number of
sub-samples will be selected based on higher risk-based characteristics. The following table is intended to summarize
the segmentation ofCitibank's portfolio, the determination ofthe applicable risk-based samples, and the expected
approach to the performance of the Foreclosure Review Services for these risk-based components (i.e., sample
approach vs. 100% coverage). With respect to each of the risk-based sample determinations included in the following
table, only the specified Consent Order requirements (a) - (h) (previously listed above as indicated) will be evaluated
as part of the Services to be performed.
(All "Estimated Population Size" numbers included in the table below are preliminary estimates based on initial
inquiries ofCitibank personnel. Sub-samples 1 through 24 are based only on the CitiMortgage population, while
sub-sample 25 is based only on the CitiFinancial population. These numbers may be subject to revision upon
completion ofadditional data gathering activities.)
Estimated
Sub- Potential Higher Population Sample Basis for Higher Risk Procedures
Sample Risk Segmentations Size Size Segmentation Approach Performed
1 SCRAcases 700 700 Foreclosures that have been referred B
or completed that include an (SCRACheck
indication that the borrower may Only)
have been subject to SCRA would
indicate a potential violation of
applicable state and/or federal laws.
Accordingly, the risk for potential
financial injury is magnified and
therefore, 100% coverage of these
instances will be reviewed as part of
the Foreclosure Review activities
2 Customer complaints 140 140 Customer complaints referred by A through H
referred by state and state and federal agencies regarding (As
federal agencies foreclosure issues would be Applicable)
regarding foreclosure representative of higher risk items.
issues Accordingly, 100% coverage of these
instances ",ill be reviewed as of
the Foreclosure Review
Foreclosures that been B
that include an indication
that occurred when that borrower may have been
there an indication entitled to bankruptcy protection
that the borrower was would indicate a potential violation
in active bankruptcy of applicable state and/ or federal
protection laws. Accordingly, the risk for
potential financial injury is
magnified and therefore, 100%
coverage of these instances ",ill be
reviewed as of the Foreclosure
Review
CITI-EL-00000007
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Estimated
Sub- Potential Higher Population Sample
Sample Risk Segmentations Size Size
4
Top foreclosure activity 339,000 1,315
states during 2009 and
2010
5
Top foreclosure sales 104,000 1,315
states during 2009 and
2010
Foreclosure referrals at 500
Basis for Higher Risk
Segmentation Approach
Top states where the institution
conducted its foreclosure activity
should be covered. The sample
should be representative and
include case files from every state in
which the foreclosures were
conducted by the institution. To
accomplish this, the following will
be selected: 100 loans for each of the
10 States with highest foreclosure
activity; 100 loans for New Jersey;
and a base sample of 100 loans from
the remaining 43 states and
territories that will be supplemented
so that each state or territory has a
minimum of 5 loans.
Top states where the institution
conducted its foreclosure sales
should be covered. The sample
should be representative and
include case files from every state in
which the foreclosures were
conducted by the institution. To
accomplish this, the following will
be selected: 100 loans for each of the
10 States with highest foreclosure
sales; 100 loans for New Jersey; and
a base sample of 100 loans from the
remaining 43 states and territories
that will be supplemented so that
each state or territory has a
minimum of 5 loans.
reviewed as
Foreclosure Review "I'Tn11!"""
Given the increased risk for
potential financial injury associated
with completed foreclosures with
bankruptcy indications, a higher
level of statistical confidence will be
utilized a reliability level of
Procedures
Performed
A through H
A through H
B
CITI-EL-00000008
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Estimated
7
Foreclosure referrals 53,000 150 Foreclosure referrals for which a B
for which a bankruptcy bankruptcy protection notification (Bankruptcy
protection notification has been received at any time during Check Only)
has been received at the process may be higher risk for
any time during the potential financial injury and will be
process reviewed as part of the Foreclosure
Review activities. Given the
increased risk for potential financial
injury associated with completed
foreclosures with bankruptcy
indications, a higher level of
statistical confidence will be utilized
whereby a reliability level of 95%
will be coupled with a precision level
of 2% to generate a sample size of
150.
8 Non-judicial States 186,000 Not Given that the top foreclosure Not
Applicable activity and foreclosure sales states Applicable
are selected to ensure geographical
coverage, non-judicial states are
represented in sub-samples 4 and 5.
As such, inclusion of a separate
higher risk segment for non-judicial
states is not considered necessary.
9
Law Offices 21,000 150 Law firms known to have significant A through H
..
deficiencies related to foreclosure
activities, were delisted by any of the
GSEs, or discontinued by the
institution are deemed higher risk.
potential financial
with the Law
level of
will be utilized
will
level of
size of150.
10 2,700 150 Law firms known to have significant A through H
financial associated
CITI-EL-00000009
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Sub
Sample
11
12
Potential Higher
Risk Segmentations
Large volume
foreclosure firms
Estimated
Population
Size
4,900
Not
Applicable
Sample
Size
150
Not
Applicable
150.
Procedures
Performed
Law firms known to have significant A through H
with the other GSE delisted law
firms, a higher level of statistical
confidence will be utilized whereby a
reliability level of 95% will be
coupled with a precision level of 2%
to generate a sample size of 150.
Given that the top foreclosure
activity and foreclosure sales states
are selected using a random sample
generator and selected to ensure
geographical coverage, the resulting
selections should be representative
of the volume of foreclosure firms
used by Citibank. Additionally, even
though higher foreclosure volumes
by law firms might be indicative of
potential higher risk factors, there is
no current basis to conclude that
there is a higher risk of financial
associated with these law
firms. As inclusion of a
risk segment for
attorneys
not considered necessary.
To the extent there arc anv
identified trends with respect to
observations and/or financial injury
within the geographical samples
and/or other higher risk sample
determinations that are specific to
foreclosure attorneys, additional
focused on those identified
be
Not
Applicable
CITI-EL-00000010
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Sub-
Sample
13
14
15
16
17
Potential Higher
Risk Segmentations
Other third party
vendors
Document execution
service providers
Rescinded Foreclosures
Mortgages that were
foreclosed when an
Loan not in default for
a sufficient period of
time to authorize
foreclosure
Estimated
Population
Size
Not
Applicable
Not
Applicable
4,800
Not
Not
Applicable
Sample
Size
Not
Applicable
Not
Applicable
150
Not
Applicable
Not
Applicable
Through inquiries of Citibank
personnel, there are no other third
party vendors of Citibank that have
significant roles within the
foreclosure process beyond the
foreclosure attorneys discussed
above. Accordingly, the inclusion of
a separate higher risk segment for
miscellaneous other third party
vendors is not considered necessary.
Citibank does not use third party
document execution service
providers.
"Mortgage rescissions" are defined
as those foreclosure sales which had
been completed and were rescinded
by Citibank for various reasons, e.g.,
additional facts/information
obtained, a new opportunity for a
loan modification, additional review
procedures, etc.) Given the
injury associated with rescinded
foreclosures, a higher level of
150.
The Bank is unable to identify this
of the
sales
Based on inquiries with Citibank
personnel, given that all foreclosure
activities are triggered by servicing
system-based delinquency and
default information/status, existing
system controls foreclosure
activities from commenced
Procedures
Performed
Not
Applicable
Not
Applicable
A through H
Not
Not
Applicable
CITI-EL-00000011
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Estimated
inclusion of a separate higher risk
segment for such situations is not
considered necessary. This
assertion is further complemented
by the timing of foreclosure
proceedings being initiated being
part of the evaluation of the Consent
Order requirements for many of the
risk-based sample determinations
pursuant to the OCC's guidance that
that these samples be subjected to
the testing of all of the Consent
Order requirements (a) - (h).
18 Denied HAMP 58,100 150 Denied HAMP modifications have G
been identified as a potential higher
risk segment, primarily as it relates
to the evaluation of debt-to-income
calculations. Accordingly, the
Foreclosure Review Services will
include a higher risk segment for
denied HAMP modifications during
the Review Period whereby the
indicated denial reasons were
associated with the debt-to-income
and/or net present valuation
calculations. The sampling
approach associated with this higher
risk segment will be on a targeted
scope basis whereby only Consent
Order requirement (g) will be
evaluated for the sample obtained.
The results of this targeted scope
dPlllUtu::h will then be evaluated with
r:.espect the determination of
financial the bvttV' ,<;1
the pursuant to Consent
Order Given the
risk for potential financial
injury associated with denied
HAMPs, a higher level of statistical
CITI-EL-00000012
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Estimated
19 Failed HAMP 38,600 150 Failed HAMP modifications have G
been identified as a potential higher
risk segment. Accordingly, the
failed HAMP modifications during
the Review Period. The sampling
approach will then be evaluated with
respect to the determination of
financial injury to the borrower or
the mortgagee pursuant to Consent
Order requirement (h). Given the
injury associated with failed
HAMPs, a higher level of statistical
20 Denied Proprietary 10,900 150 Denied proprietary modifications G
Modification have been identified as a potential
higher risk segment, primarily as it
relates to the evaluation of debt-to-
income and/or net present value
calculations. Accordingly, the
denied modifications
Period
the reasons
associated with the debt-to-income
net present valuation
The sampling
will then be evaluated with
CITI-EL-00000013
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Sub
Sample
21
22
23
Potential Higher
Risk Segmentations
Failed Proprietary
Modification
Borrower with debt
cancellation product
from Citibank
"Pyramiding fees" - fees
assessed prior to
Estimated
Population
Size
700
Not
Applicable
Not
Applicable
Sample
Size
150
Not
Applicable
Not
Applicable
the mortgagee pursuant to Consent
Order requirement (h). Given the
injury associated with denied
proprietary modifications, a higher
utilized whereby a reliability level of
95% will be coupled with a precision
level of 2% to generate a sample size
Of150.
Failed proprietary modifications
have been identified as a potential
higher risk segment. Accordingly,
the Foreclosure Review Services will
failed proprietary modifications
during the Review Period. The
sampling approach associated with
this higher risk segment will be on a
targeted scope basis whereby only
Consent Order requirement (g) will
be evaluated for the sample
obtained. The results of this
targeted scope approach will then be
evaluated with respect to the
determination of financial injury to
the borrower or the mortgagee
pursuant to Consent Order
requirement (h). Given the
injury associated with failed
proprietary modifications, a higher
utilized level of
will be "vC'tJ"'U
Based upon preliminary reviews of
certain foreclosure files and
inquiries of Citibank personnel, it
that Citibank loan
Procedures
Performed
G
Not
Applicable
Not
Applicable
CITI-EL-00000014
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Estimated
and no such fees were collected.
Further, the pennissibility and
reasonableness of fees is part of the
requirements for other risk-based
samples be subjected to the testing
of all of the Consent Order
requirements Ca) - (h). Accordingly,
there will be no higher risk segment
related to "pyramiding fees" for
purposes of the Foreclosure Review
Services.
24 Loans with Customer 150 150 Customer complaints are a potential A through H
Complaints received indicator that a borrower may have
from January 1, 2009 - incurred a potential financial injury
December 31, 2010 with respect to a given foreclosure.
with claims/complaints that were
received directly from borrowers of
Citibank during the period from
January 1, 2009 through December
31, 2010, a higher level of statistical
This population includes customer
complaints received by the ERU
related to foreclosures in process or
foreclosure sales.
25 CitiFinancial Loans 19,000 150 review of cases from A through H
other l:'lUct::>"ingcenters. As this
the inllnr.illJ
of statistical
idpnrp will be utilized ,ht:! eby a
reliability level of will be
coupled with a levelof2%
Total 7,070
CITI-EL-0000001S
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bankruptcy protection. Next, sub-samples 4 24 will be selected, as appropriate, to achieve the required sample size
for each sub-sample. Finally, sub-sample 25 will be comprised of 150 CitiFinancialloans.
The initial sample size across all procedures is estimated to be 7,070 for Citibank's popUlation and should
meet the requirements ofthe Consent Order and OCC Sampling Methodology guidelines.
With respect to the aggregate population numbers presented above as well as the higher risk segment populations
presented in the previous table, PwC will evaluate Citibank's generation of the population information through review
of Citibank-produced documentation related to the completeness and accuracy of this information, inquiry of the
applicable management team regarding the popUlations and processes for generating such information, review and
inquiry over Citibank's evaluation of this population information in comparison to previously generated reporting for
internal and external purposes, and/or other procedures considered necessary, as applicable.
In evaluating the initial sample results associated with each of the Consent Order Requirements, certain base
assumptions will guide the overall evaluation of any preliminary observations - including but not limited to
the following:
Individual samples will be drawn from all loans serviced by CitiMortgage, Inc. from the
approximately 358,000 residential foreclosure actions or proceedings that have been pending at any
time from January 1, 2009 to December 31,2010. Citigroup, Inc. has only two entities engaged in
mortgage servicing operations in the United States: CitiMortgage, Inc. and CitiFinancial Credit
Corporation and its subsidiaries. The foreclosure work for CitiFinancial Credit Corporation, however,
is performed by CitiMortgage, Inc. CitiMortgage, Inc. services loans on behalf of itself and its
affiliates including Citibank, NA, Citicorp USA, Citicorp Trust Bank, Citigroup Global Markets Realty
Corporation, Citi Residential Lending, Inc. and CitiFinancial Credit Corporation and its subsidiaries.
As such, it is appropriate to draw the samples from this combined pool ofloans to the extent any such
owned loans have gone into foreclosure. In addition, loans owned by unaffiliated third party
investors will be included in the pool from which the sample is drawn.
For purposes of this Agreement, an "Observation" is an error, misrepresentation, or other deficiency
identified as a result of procedures performed with respect to paragraphs 3( a) through 3(g) ofArticle
VII the Consent Order. A "Difference" is an Observation for which there is evidence, based on the
procedures performed and supporting documentation that the Observation resulted in financial
injury to the borrower or to the mortgagee.
Pursuant to the Handbook, if no Observations are found in the initial sample results, then the desired
statistical reliability and precision levels have been attained and no further evaluation is warranted.
When Observations are found, further analysis may be performed to evaluate the Observations,
m(cm,amlg but not limited to the root causes of the Observations and whether the Observations are
isolated occurrences are reflective furthcr evaluation.
PwC
Where Observations are PwC will Uroot cause" """h!":!':;
commou characteristics and/or attributes ofthe initial Additional "U>HV''-O
performed for the corresponding population of loans with those specific
identified to determine whether there is a pervasive observation with respect to that population of
loans. For example, if Observatiou(s) were only found with fees in loans \\'ithout escrow, additional
samples would be purposed for such loans to further isolate those issues. For these additional
samples, we may conduct selective procedures if warranted (e.g. fees only). In such circumstances,
there would be no expectation that loans from other sub-samples would need to be further sampled
and """'''U101
CITI-EL-00000016
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The approach to be taken for any additional samples will be based on individual facts and
circumstances associated with the results of the initial sample and will be discussed with and
approved by the OCC prior to initiating and reviewing an additional sample.
Citibank will supply Independent Counsel, for the use by such counsel, a matrix ("CITI SUPPLIED
LAW MATRIX") of State laws drafted by outside counsel Hudson Cook, a matrix ("CITI SUPPLIED
FEE MATRIX") of applicable fees, the Servicemembers Civil Relief Act ("SCRA"), and the U.S.
Bankruptcy Code.
Independent Counsel will develop a matrix ("COUNSEL SUPPLIED LAW MATRIX") of State laws
and Federal laws (including SCRA and bankruptcy) a matrix ("COUNSEL SUPPLIED FEE MATRIX")
of applicable fees.
Key Consent Order Definitions
Key Consent Order Definitions are contained in Exhibit C: "occ and FRB Guidance - Financial Injury or
Other Remediation" issued August 29, 2011. PwC will use best efforts so that its services in connection with
the Foreclosure Review are consistent with this guidance.
Approach - PwC will determine a sample using the approach described above and will provide the account numbers
to be sampled to Citibank. Citibank will provide PwC with the necessary information and documents to properly
analyze actions taken on those accounts. PwC will then perform the actions requested in the Consent Order as
described below. The results ofeach procedure will be reviewed with Independent Counsel, who will advise on
applicable state andfederallaw issues.
Consent Order
Requirements
(a) Whether at the time of
the foreclosure action was
initiated or the pleading or
affidavit filed (including in
and in suits
brought by borrowers), the
foreclosing party or agent
of the party had properly
documented ownership of
the promissory note and
mortgage (or deed of trust)
under relevant state law, or
was otherwise a proper
party to the action as a
result of agency or Similar
Scoping Assumptions
Sample size: 3,670
Risk-based
determination: see Defined
above.
Foreclosure Review Activities
(Note that the Foreclosure Review activities and reporting
considerations described herein are preliminary and
illustrative only. The listing is not intended to be fully
inclusive and will be subject to further revisions based on
continued industry evaluations, benchmarking and/or specific
facts and circumstances unique to Citibank and Citibank's
operations, documentation and/or systems.)
2.
Key documents to be obtained from Citibank,
read and analyzed, include copies of the:
a. Original filed affidavit;
b. Revised affidavit applicable);
executed Note and any riders,
modifications, aSSignments or
amendments;
e. Mortgage;
f. Endorsements; and
g. Legal name changes of borrower.
With respect to the legal standing of the party
reflected in the key documents, Observations will
be reported for the following:
a. Inconsistencies between the name of the
trm""I,'''';,,("1 party as reflected on the
CITI-EL-00000017
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Consent Order
Requirements
(b) Whether the
foreclosure was in
accordance with applicable
state and federal laws,
including but not limited to
the Service members Civil
Relief Act ("SCRA") and
the U.S. Bankruptcy Code.
(In accordance with
paragraph of Article
VII of the Consent Order,
Consent Order
will
identify any foreclosures
which were not
authorized.)
Scoping Assumptions
Sample size: 6,470
Risk-based sample
Populations above.
i. The borrower name on the loan
note;
ii. The lack of correct
endorsement;
iii. The chain of consecutive
aSSignments from the party
named within the mortgage to
the party holding the
assignment or named in the
servicing agreement;
b. Inconsistencies between beneficiary
information included in_(as/if
applicable) and the executing entity.
c. Lack of existence of an original
promissory note where required by state
law, as certified by the Citi document
custodian.
1. With respect to the key documents and timing
requirements and waiting periods identified in the
COUNSEL SUPPLIED LAW MATRIX to be read I
determined and analyzed, Observations will be
reported for the following. (if applicable):
a. In "start-over" states, any foreclosure
proceedings that were not restarted after
an interruption due to bankruptcy or
other reasons
b. Specific notices of default or sale were
not sent in accordance with the
COUNSEL SUPPLIED LAW MATRIX.
Any state mandated waiting periods or
notificationipublishingiposting/mailing
requirements as specified in the
COUNSEL SUPPLIED LAW MATRIX
were not satisfied;
2. SCRA review will be conducted using the
COUNSEL SUPPLIED LAW MATRIX of SCRA
policy for both federal SCRA and state-specific
military protections. Observations will be reported
for the following:
CITI-EL-00000018
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Consent Order
Requirements
foreclosure sale occurred
when an for a
modification or other
Loss Mitigation defined
in the Consent Order) was
under consideration; when
the loan was performing in
permanent loan
modification; or when the
loan had not been in
default for a sufficient
period of time to authorize
to the
Scoping Assumptions
b. The customer was on active duty at the
time foreclosure proceedings were
initiated, as determined by coding on the
servicing system to that effect
c. Foreclosure activity occurred while a
stay of proceedings was in effect
d. Any applicable state laws regarding
military service member protections were
not followed
3. Bankruptcy - Accounts will be reviewed to
determine whether foreclosure proceedings took
place while the customer was protected by U.S.
Bankruptcy laws. Observations will be reported
for the following:
a. Situations where the bank had any
knowledge of an active bankruptcy when
foreclosure proceedings were
considered, as evidenced by a review of
the Banko system, and proceedings
were initiated, unless one of the
following documents were present:
1. Order terminating stay;
2. Dismissal Order; or
3. Discharge Order.
1. Key documents to be obtained from Citibank. read
and include:
system notes;
d. history; and
e. Tools and calculations used to
underwrite loan modifications (including
HAMP)
2. With respect to delinquency and loss mitigation
status activities/information, Observations will be
reported for the following:
a. Delinquency status
CITI-EL-00000019
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Consent Order
Requirements
documents and related
agreements.
(In accordance with
paragraph 5(b) of Article
VII of the Consent Order,
Consent Order
Requirement 3(c) will
identify any foreclosures
which were not
authorized.)
Scoping Assumptions
facts and circumstances unique to Citibank and CWbank's
of the "breach" or
"acceleration" letter was less
than an established
requirement as determined by
the COUNSEL SUPPLIED
LAW MATRIX; and/or
ii. Instances where the period of
time that lapsed between
breach and initiation of
foreclosure proceedings was
less than an established
requirement as determined by
the COUNSEL SUPPLIED
LAW MATRIX; or
iii. Instances where a foreclosure
sale was completed when the
loan had not been in default for
a sufficient period of time to
authorize foreclosure, as
determined by the terms of the
mortgage or deed of trust, if
any.
b. Loss mitigation
i. Situations where the borrower
was granted a HAMP or
proprietary modification and
was performing as agreed
under the terms of the
modification at the time of the
foreclosure sale evidenced
review of the "..,"\twlrln
system notes and payment
history
Situations where the borrower
submitted a properly completed
application for a loss mitigation
program or loan modification
program prior to foreclosure
and the bank either
a. Did not properly
consider the appl!(;atl,on
" " r ' ~ n r ' r 1 t r ' " to its
CITI-EL-00000020
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Consent Order
Requirements
(d) Whether, with respect
to non-judicial
foreclosures, the
procedures followed with
respect to the foreclosure
sale (including the
calculation of the default
period, the amounts due,
and compliance with notice
periods) and post-sale
confirmation were in
accordance with the terms
of the mortgage loan and
state law requirements.
Scoping Assumptions
Sample size: minimum 100
Risk-based sample
Populations above.
inclusive and wi/( be subject to further revisions based on
facts and circumstances unique to Cmbank and CWbank's
or
b. Approved the loss
mitigation or loan
modification but did not
act in a timely fashion
to stop the foreclosure
sale
1. Key documents to be obtained from Citibank, read
and analyzed, as it relates to non-judicial
foreclosure activities, include copies of the:
a. Original mortgage / deed of trust
b. Notice of Default
c. Notice of Sale
d. Any post-sale confirmation to the
borrower
e. Supporting documentation for any
calculations of amounts due done by
outside counsel
2. Observations will be reported for the following:
a. Inconsistencies between the total
amounts demanded to avoid foreclosure
per the servicing system and the amount
due to avoid foreclosure as included in
the "notice of default" letter as of
issuance date, if listed;
b. If applicable, any notice of sale including
a balance due where such as balance
did not reconcile to the
system and or related
documentation
If applicable, any post sale confirmation
including a balance due where such as
balance did not accurately reconcile to
the servicing system and I or related
documentation
d. Situations where the default period had
not been calculated correctly, as defined
in the original mortgage or deed of trust
Situations in which the between
CITI-EL-00000021
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Consent Order
Requirements
(e) Whether a delinquent
borrower's account was
only charged fees and/or
penalties that were
permissible under the
terms of the borrower's
loan documents,
applicable state and
federal law, and were
reasonable and customary
Scoping Assumptions
Sample size: 3,670
Risk-based sample
Populations above.
facts and circumstances unique to Citibank and CWbank's
exceed an established requirement; and
f. Instances in which post-sale
confirmations, if any were not issued
and/or executed after an established
requirement.
1. As related to fees, key documents to be obtained
from Citibank, read and analyzed include copies
of the:
a. Original Note / Mortgage / Deed of Trust
b. Breach or acceleration letter
c. Servicing System transaction history
showing assessment of late charges
d. Servicing System fee history showing
history of fees assessed and billed to the
borrower
e. IClear invoices (or similar) for fees
charged to borrower, whether or not
recorded in the servicing system
f. COUNSEL SUPPLIED FEE MATRIX of
any statutory maximums on fees, late
charges, and penalties. A list of
potential fees is attached hereto as
Exhibit A. Any state fee caps preempted
by the National Bank Act (12 U.S.C.
24 (7th), 85) and OCC regulations (i.e.,
12 CFR 7.4001 and 12 CFR 7.4002) in
existence at the time will not be
considered for purposes of the review.
With to the COUNSEL SUPPLIED FEE
MATRIX, Observations will be reported for those
instances in which the fees charged by Citibank
were in excess of the permissible fees/penalties
for the following fees:
a. Fees, late charges and penalties as
detailed on the breach / acceleration
letter; and
b. Any fees, late charges or penalties
assessed after the date of the breach
CITI-EL-00000022
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Consent Order Foreclosure Review Activities
Requirements Scoping Assumptions and Reporting Considerations
illustrative only. The listing is not intended to be fuf/y
facts and circumstances unique to Citibank and Cit/bank's
observations will be reported for those instances
where:
a. Late charges assessed the borrower
exceeded the contractual maximum late
charge as specified in the note
b. Any other charges contractually limited
by the note, mortgage, or deed of trust, if
any, that exceeded the amount
contractually agreed upon
4. Fees and penalties assessed to borrowers will be
evaluated to see where they are reasonable and
customary as defined in Exhibit C.
Any inconsistencies will be reported as an
Observation. A Difference will be reported as 1) when
the borrower paid an excessive fee; or 2) when unpaid
excessive fees exceed any deficiency resulting from
the foreclosure sale.
(f) Whether the frequency Sample size: 3,670 1. As related to fees, key documents to be obtained,
that fees were assessed to read and analyzed include copies of the
any delinquent borrower's Risk-based sample a. Original Note / Mortgage / Deed of Trust
account (including broker determination: see Defined b. Breach or acceleration letter
price opinions) was Populations above. c. Servicing System transaction history
excessive under the terms showing assessment of late charges
of the borrower's loan d. ServiCing System fee history showing
documents and applicable history of fees assessed and billed to the
state and federal law. borrower
IClear invoices for fees
charged to borrower but not recorded in
the servicing system
f. COUNSEL SUPPLIED FEE MATRIX of
any statutory maximums on fees, late
charges, and penalties. A list of potential
fees is attached hereto as Exhibit A. Any
state fee caps preempted by the National
Bank Act (12 U.S.C. 24 (7th), 85) and
OCC regulations (I.e., 12 CFR 7.4001
and 12 CFR 7.4002) in existence at the
time will not be considered for purposes
the
CITI-EL-00000023
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Consent Order
Requirements
Whether Loss
Mitigation Activities with
respect to foreclosed loans
were handled in
accordance with the
requirements of the Home
Affordable Modification
Program C'HAMP"), and
consistent with the policies
and procedures applicable
Citibank's
Scoping Assumptions
size: 4,270
Riskbased sample
Populations above.
facts and circumstances unique to Citibank and Cmbank's
2. Frequency of Fee Assessment - With respect to
the COUNSEL SUPPLIED FEE MATRIX,
Observations will be reported for instances in
which the frequency of the assessment of fees by
Citibank exceeded an established requirement for
the following fees:
a. Fees, late charges and penalties as
detailed on the breach / acceleration
letter; and
b. Any fees, late charges or penalties
assessed after the date of the breach /
acceleration letter.
3. With respect to the original note, mortgage and or
deed of trust, observations will be reported:
a. For any late charges exceeding the
frequency of assessment contractually
permitted in the original loan documents
b. For any other fees or penalties
contractually limited in the original loan
documents, instances where the fee or
penalty was assessed more often than
contractually permitted
Any inconsistencies will be reported as an
Observation. A Difference will be reported as 1) when
I
the borrower paid an excessive fee; or 2) when unpaid
excessive fees exceed any deficiency resulting from
, the foreclosure sale.
1. documents to be obtained from read
and analyzed, include:
a. notes;
b.
c.
d. history;
e. Account payment history;
f. Borrower's income documentation;
g. Credit Bureau Report; and
h. Inputs supporting NPV calculations.
CITI-EL-00000024
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Consent Order
Requirements
such that each borrower
had an adequate
opportunity to apply for a
Loss Mitigation option or
program, any such
application was handled
properly, a final decision
was made on a reasonable
basis, and was
communicated to the
borrower before the
foreclosure sale.
Scoping Assumptions
by Citibank. In the event of multiple loss mitigation
attempts occurring on the same account, the most
recent HAMP attempt, if any, and the most recent
proprietary modification if made subsequent to the
most recent HAMP modification will be reviewed.
2. HAMP Loss Mitigation
a. With respect to the eligible HAMP
population (Le., which investors have
opted into the program), Observations
will be reported for the following based
on a review of Servicing System notes:
L Lack of evidence of the offering
of HAMP to eligible borrowers;
ii. Lack of evidence of the review
and/or analysis of information
returned by the borrower for
modification consideration;
iiL Inconsistencies between
HAMP eligibility and
management's
approval/rejection decision
utilizing the information
returned by the borrower; and
approval or rejection were not
provided to the borrower
b. For HAMP modifications that were
denied the bank, DTI and NPV
calculations will be validated, and any
errors in calculation will be as
an observation.
3. Proprietary Loss Mitigation
a. With respect to proprietary loss
mitigation population, which will be
defined to include forbearance, loan
modifications, short sales, cash for keys
and deed in lieu- Observations will be
reported for the following, based on a
review of notes:
CITI-EL-0000002S
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Consent Order
Requirements Scoping Assumptions
facts and circumstances unique to Citibank and Cit/bank's
with eligible borrowers with
whom contact had been made
(taking into account any
investor guidelines);
ii. Lack of evidence of a
qualification analysis for those
borrowers who communicated
interest in a loss mitigation
solution;
iii. Instances of loss mitigation
denials being made contrary to
the Bank's applicable Policies
& Procedures in effect at the
time; and
approval or rejections that were
not provided to the borrower in
accordance with Citi's policies
& procedures
b, For proprietary modifications that were
denied by the bank, DTI calculations and
NPV inputs will be validated, if used in
the consideration, and any errors in
calculation will be reported as an
observation.
For purposes of completing the aforementioned
Foreclosure Review, only the last HAMP modification
and the final proprietary loss mitigation activity
to the last HAMP if any, will
CITI-EL-00000026
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Consent Order Foreclosure Review Activities
Requirements Scoping Assumptions and Reporting Considerations
facts and circumstances unique to Cmbank and CWbank's
(h) Whether any errors, Sample size: previous Observations related to steps performed within
misrepresentations, or samples for Consent Order Consent Order Requirements (a) - (g) will be
other deficiencies identified Requirements (a) - (g). considered in relation to whether financial injury
in the Foreclosure Review resulted to the borrower or mortgagee. Any
resulted in financial injury Observation for which there is evidence, based on the
to the borrower or the procedures performed and supporting documentation
mortgagee that the Observation resulted in financial injury to the
borrower or to the mortgagee will be reported as a
Difference.
Observations will be separately identified and reported
from Differences. For each procedure, we will record
each Observation and/or Difference. We will provide
weekly status reports for number of loans sampled,
and any Observations and/or Differences noted. Upon
completion of our sample(s) and at the end of our
review, we will provide a report with the results of all
loans sampled and, by loan, any Observations and/or
Differences noted.
Submission and Review of Post-Consent Order Complaints
Subsequent to the issuance of the Consent Order, the OCC has provided additional guidance to Citibank requiring a
process for submission and review of borrower claims and complaints related to foreclosures during the Review
Period. The OCC has provided guidance regarding a borrower outreach process for complaints to be established
related to foreclosure actions initiated, pending or completed in 2009 or 2010. The process of submission and
evaluation of borrower complaints as well as the borrower outreach process is to be established Citibank and meet
forth in the the OCC.
to borrower and
servicers that are subject to the Consent Order
designed these and is meant to provide
and execution of outreach and intake. Coordinated Approach includes certain processes
by a common vendor on behalf of all servicers, and other processes that are to be executed by
each servicer's respective vendor, but in a consistent manner.
The independent consultant's role is to advise on the type of process that Citibank may use for the borrower outreach
complaint process and the related ongoing quality control and oversight processes designed to meet the objectives of
the OCC's using the Process (as defined below). Specifically, the independent consultant is
on the of the Coordinated with
CITI-EL-00000027
pwc
the bank's vendors' execution ofthe outreach and intake processes, (iv) incorporating all applicable complaints into
the Foreclosure Review, and (v) performing an independent review of each in-scope complaint and reporting any
observations and differences, to include recommendations as to proposed remediation and/or compensation to be
made to each borrower identified by PwC as one who suffered, or may suffer financial injury in accordance with the
August 29, 2011 OCC and FRB Guidance on Financial Injury or Other Remediation. The independent consultant will
also provide observations and recommendations to Citibank and the OCC designed to achieve the objectives of the
notification process.
Pursuant to the OCC's guidance, the Foreclosure Review must include (i) all complaints received through the borrower
outreach process established per this guidance, and (ii) complaints received from borrowers through any channel (e.g.,
directly by Citibank, attorneys general, state banking agencies and all other regulatory agencies) since January 1, 2011,
that are regarding residential mortgage foreclosure actions that were initiated, pending, or completed in 2009 or
2010. Complaints for borrowers in active litigation must be included if they are otherwise in-scope. All in-scope
complaints received through the borrower outreach process, from the launch ofthe outreach (with a launch target
date no later than September 30,2011) to the cut-off date (120 calendar days from the launch date), will be subjected
to the Foreclosure Review.
The borrower outreach process is expected by the OCC to be a distinct, separate process from Citibank's existing
customer service channel. Citibank will employ a vendor ("Complaint Intake Vendor") to assist with portions ofthe
intake process, in line with the Coordinated Approach. The Complaint Intake Vendor will be engaged by and work at
the direction of Citibank. PwC will have no contractual relationship with the Complaint Intake Vendor. All complaints
received through the borrower outreach process will be logged by the Complaint Intake Vendor. Complaints filed
through the borrower outreach process cannot be excluded from remedies provided by the Foreclosure Review unless
a determination is made that the complaint is not in-scope, a process which will be subject to a review by the
independent consultant as further discussed below. The independent consultant will obtain from Citibank and
analyze a report which tracks the nature and resolution of each complaint received and periodically report data to the
appropriate regulatory agency regarding (i) complaints received through the borrower outreach process,
(ij) exclusions of complaints from the Foreclosure Review and the reason for exclusion, (iii) resolution of the
complaint, and (iv) other data as further described herein.
The general framework for the complaint process is outlined below:
Loan Population - Citibank will be responsible for identifYing the loans that are responsive to the Consent
Order and providing a detailed description of the process used to gather the data. PwC will understand the
process used by Citibank to gather data related to such loans, and will perform procedures designed to
evaluate that process.

o With respect to direct mail, the OCC's current guidelines are as follows: (1) mail notifications will be
subject to revie,,,, by the OCC, (2), the OCC ,vill contact state attorney generals, the Department of
.Tustice, and other federal regulatory agencies and invite them to identify borrowers who filed a
complaint with their office during the in-scope time period, and to submit any of those complaints
for review and consideration as and (3) Citibank will conduct outreach to
CITI-EL-00000028
pwc

borrower complaint process. Direct mailings will be conducted by the Complaint Intake Vendor in
accordance with the schedule and process outlined by the Coordinated Approach.
o With respect to advertisements, the OCC's guidelines are that the advertising will be included in (1)
national newspapers and/or prominent publications and (2) selected local newspapers based on
geographical concentration of relevant borrowers. Advertisements will be designed and distributed
in accordance with the schedule and process outlined by the Coordinated Approach.
o With respect to the internet channel and/or other advertising related matters, the OCC's current
guidelines include the following: (1) a dedicated post office box to receive mailed responses from
borrowers, (2) a dedicated website within Citibank's website domain where borrowers can submit a
claim on-line; the website will contain information and processes for submission of complaints
electronically with email acknowledgement of receipt of the complaint, (3) outreach programs
through the internet, including email addresses, (4) consideration of the use of social media or
social networks to publicize the complaint process or to facilitate submission of a complaint, and
(5) a dedicated toll free number to be used by borrowers with complaints. The Coordinated
Approach will provide requirements for the website, and an approach for the call center. The
website and call center will be hosted by the Complaint Intake Vendor.
o Citibank anticipates that certain direct mail to in-scope borrowers could be returned if the
borrower's mailing address was same as that of the related foreclosed property. Accordingly, a skip
tracing process is expected to be put in place to handle returned mail and to trace the borrower's
current address. It is required that a third party complaint administration vendor will execute this
process. Related to return mail, the OCC has the expectation that (1) there will be a dedicated post
office box for receiving returned mail, (2) the Complaint Intake Vendor will use skip tracing
methods to identify the borrower's current address, and (3) multiple attempts will be made to locate
and contact the borrower if communication is returned. Citibank will utilize a skip tracing process to
be designed as part of the Coordinated Approach.
o PwC will leverage the Advisory Process (as defined below) to assist in providing input on the design
and development of the Coordinated Approach, Citibank-specific implementation of the
Coordinated Approach, and the aspects of the complaint process that are not covered by the
Coordinated Approach, with respect to the notification process.
o The OCC's expectations with respect to the content of the notification material include at a
minimum the following information: (1) why the borrower is being contacted, (2) how eligibility for
the notification/ contact was determined, (3) necessary information that Citibank will need from the
borrower upon response, (4) the channels available for the borrower to contact Citibank, (5) the
timeframe for filing a complaint with Citibank and, (6) what to expect from the complaint process,
including when to expect a response .
Ave'PH1'" the Coordinated
Intake
and Citibank resources that are dedicated to this effort. At a minimum, this will
ldU'll"JllllJe,the means for the borrowers to about their ability to make a
..-r._..... via a website or mail, providing a that will allow the
borrower to the nature of the complaint and provide information and
documentation to support the complaint, (3) developing a plan for status reporting to those
borrowers who make a complaint through this process, (4) providing complete tracking and
reporting of all contact with borrowers relating to the Foreclosure Review effort, and (5) developing
a means for all complaints received and supporting documents to be incorporated into the
Foreclosure Review.
CITI-EL-00000029
pwc

o PwC will advise Citibank regarding training with respect to the execution of the complaint intake
process. This training would include assessment of, (1) key information to be collected,
(2) information on the forwarding/transferring of in-scope complaints from the normal customer
service process, and (3) relevant foreclosure complaint scripts, frequently asked questions and/or
other materials.
o Citibank and the Complaint Intake Vendor will be responsible for executing the complaint intake
process and providing updates and tracking to PwC, and conducting its own procedures to test the
process. The intake process should provide a consistent sent of questions to be answered by the
borrowers including, but not limited to, (1) current contact information, (2) eligibility determination
questions, (3) the specific nature ofthe complaint, and (4) identification of any previous complaints
by the borrower, where applicable.
o PwC will evaluate the complaint process, and will provide observations and recommendations to
Citibank and the OCC to achieve the objectives of the complaint process. This may include,
(1) monitoring a judgmental sample of calls by the customer service representatives to assess the
appropriate handling of complaints, and providing feedback to the customer services representative
team, (2) assessing performance data such as call wait times and dropped calls to determine the
adequacy of technology resources and staffing levels, and (3) providing recommendations to update
scripts and procedures as may be necessary for continued improvement of the complaint process.
o Citibank will also direct the Complaint Intake Vendor to provide updates and tracking to PwC for
purposes of PwC's analyses related to the Foreclosure Review.
o With respect to the complaint resolution process, all complaints will need to be logged, including
out-of-scope complaints. For complaints received by the Complaint Intake Vendor, this vendor will
forward all complaints to Citibank. It is the responsibility of Citibank to prepare the case file and
conduct the initial review of the complaint. Citibank will then forward the in-scope complaints, a
report of Citibank's findings and its proposed resolution to PwC for independent review. PwC's
review will be independent of any review previously prepared by Citibank. To the extent any
immediate remedial action is required or desired by Citibank, such actions make be taken subject to
subsequent independent review by PwC and any additional requirements of the Foreclosure Review
remediation plan approved by the OCC.
o If the nature of the borrower inquiry does not pertain to in-scope mortgages/foreclosures, such
borrower contact will be transferred to Citibank's existing customer service channels for review and
resolution in accordance with existing Citibank processes.
o Citibank will be responsible for documenting and storing all complaints in a database that will be
archived per Citibank's existing policies, and a wTitten acknowledgement is expected to be provided
to the borrower, within seven (7) calendar days of the receipt of the complaint by the Complaint
Intake Vendor.
All complaints are to receive a written response from Citibank within an appropriate timeframe to
be determined. In the written response, borrowers will be provided information that outlines the
results of the analysis and that addresses all issues contained within the complaint submitted by the
borrower. If the result of Citibank's analysis determines that remediation is required, the borrower
will be informed of this in a written response and will state that a remediation is forthcoming within
time approval Citibank.
CITI-EL-00000030
pwc
(1) configuration of call center technology, (2) a web form for complaints intake, and (3) a database
to document complaints received. The OCC expects high complaint intake volumes and accordingly,
the infrastructure should be prepared to handle such volumes.
o On a monthly basis, Citibank must report internally and to the OCC, in a standardized format that
includes loan level information and aggregate volume tracking, the following data points:
(1) number of complaints received, (2) type or nature of complaints received, (3) number of
complaints in-scope and out-of-scope, (4) number of complaints acknowledged, (5) number of
complaints in process, (6) number of complaints not yet analyzed, (7) number of complaints
responded to, (8) complaints disposition, (9) number of complaints requiring remediation,
(10) number of complaints remediated, (11) aging reports as warranted/where applicable, and (12) a
comments section to provide other pertinent information, as applicable.
Incorporation of Written Complaints into the Foreclosure Review Process by the Independent Consultant
o For all complaints received meeting the aforementioned criteria, PwC will perform only the
applicable Foreclosure Review procedure (a) - (h) as described above that is specific to the nature of
the borrower's complaint and evaluate only that specific Consent Order requirement where the
nature of the complaint is specific to a given Consent Order requirement. If the complaint is not
specific and/or multiple Consent Order requirements are specified in the complaint, an assessment
of Foreclosure Review procedures (a) - (h) will be performed.
Any direct communication with the borrower will be conducted by Citibank or its Complaint Intake Vendor.
Ancillary to the provision services described above, PwC will use the following "Advisory Process" to create the
deliverables that will be used by Citibank specific to the complaint process:
1. Where available, PwC will provide initial generic examples of the deliverable based on initial understanding of the
objectives of the assignment.
2. PwC will meet with Citibank management to discuss the sampIe deliverable or the expected content of the first
draft of a deliverable where no sample exists, to firm up PwC's understanding of the objectives, and to discuss how
the generic deliverable should be adjusted/drafted to make it Citibank specific. In the discussions, PwC will utilize
its experience and knowledge ofleading practices to facilitate Citibank management in making the decisions,
determinations, etc. that Citibank deems necessary for inclusion in the document.
3. Following these discussions, PwC will revise the generic document as agreed with Citibank management, and/or
create a first draft of a Citibank-specific deliverable for Citibank management to review.
PwC will review the amended deliverable or Citibank's and make
6. Based upon Citibank management's decisions regarding PwC's observations/recommendations, PwC will
incorporate changes into the document.
7. Citibank management will decide on the final content, adopt the document as its own and approve/finalize.
CITI-EL-00000031
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Access to Information and Privileged Information
We understand that we will be required to execute a written agreement with the OCC providing for the OCC's prompt
and complete access to documents and information created by or in the possession of any of the parties with respect to
the Foreclosure Review. Pursuant to the applicable regulatory requirements, submission of any information required
by the OCC does not waive or otherwise affect any claim of privilege by Citibank, Citibank's external counsel, PwC and
Independent Counsel. The OCC will maintain requested information as confidential, non-public supervisory
information, and will review any request for access to such information in accordance with the requirements of the
OCC's applicable rules. Should the OCC receive a governmental or third party subpoena for such information, the
OCC will notify Citibank, Citibank's external counsel, PwC and Independent Counsel so that these parties may act to
protect any claim of privilege with respect to such information.
Progress Reporting and Communications with the OCC
We understand that the OCC will want to receive periodic updates throughout the timeline of this engagement with
respect to the progression of the Foreclosure Review Services discussed herein as it relates to the initial base sample
and risk-based sample population testing, the post-Consent Order claim/complaint process and/or other specific
aspects of this engagement. These updates are likely to be facilitated through the use of written updates as well as
through in-person meetings between the OCC and PwC. As previously indicated in the Independence ofPwC as
Independent Consultant section of this engagement letter, we understand that the conduct of the Foreclosure Review
shall be subject to the monitoring, oversight and direction of the OCC. PwC agrees to promptly comply with all written
comments, directions and instructions of the OCC conceruing the conduct of the Foreclosure Review consistent with
professional standards, and that it will promptly provide any documents, workpapers, materials or other information
requested by the OCC, regardless of any claim of privilege or confidentiality (but subject to any such claims).
Additionally, PWC agrees to provide regular progress reports, updates and information concerning the conduct of the
Foreclosure Review to the OCC, as directed by the OCC.
Upon approval of the engagement letter by the OCC, PwC will commence meetings with the OCC regarding the form,
nature, extent and frequency of the progress reporting and regular communications with the OCC.
Deliverables
For purposes of the Agreement, "Deliverables" refers to all documents and presentations that include
recommendations or observations based on services rendered by PwC and submitted to You in final form.
We expect to provide You with Deliverables prepared for and delivered to You under this Agreement, including the
following: PwC will prepare a written report regarding the Foreclosure Review ("Foreclosure Report"), which shall be
completed no later than within 30 days of completion of the Foreclosure Review Fieldwork Period. The will
ATHlr"j""I" u'''niTh! Observations and the borrower or mortgagee for whom each n;t'rprpnl'p
resulted and those Observations that did not result Neither Observations nor Differences will he
It that the Foreclosure will be
Comptroller, of Directors. We make any
workpapers with the Foreclosure Review to You, the OCC and the Federal Reserve upon request,
which PwC understands will be to the OCC's and the Federal Reserve's customary examination privilege, and
that the provision of such materials to the OCC or the Federal Reserve will not waive any privilege or related defense
that can be asserted by the Bank or by Independent Counsel.
You will own all Deliverables except as follows: we OWTl our working papers, preexisting materials and any general
skills, know-how, processes, or other intellectual property (including a non-Bank specific version of any Deliverables)
which we may have discovered or created as a result of the Services. You have a nonexclusive, non-transferable license
to use such materials included in the Deliverables for your own interual use as part of such
CITI-EL-00000032
pwc
or other fonnallegal process (e.g., subpoena in an administrative hearing process) to which the materials are
responsive.
In addition to Deliverables, we may develop software or other electronic tools to assist us with an engagement. If we
make these available to You, they are provided "as is" and your use ofthese tools is at your own risk.
Notwithstanding anything to the contrary in this Agreement, You shall retain ownership of all of your own materials,
proprietary information and intellectual property, including such materials, proprietary information or intellectual
property used in connection with the Foreclosure Review or in the creation ofthe Foreclosure Report or other
Deliverables, and we shall not obtain any right, title or interest in such materials, proprietary information or
intellectual property.
Use of Deliverables
PWC is providing the Services and Deliverables solely for your use and benefit as described in this Agreement. The
Services and DeIiverables are not intended for a third party's use, benefit or reliance. Except as otherwise provided in
this Agreement, PwC disclaims any contractual or other responsibility or duty of care to others based upon these
Services or Deliverables or advice we provide. Except as described below, You shall not discuss the Services with or
disclose Deliverables to any third party, or otherwise disclose the Services or Deliverables without PwC's prior written
consent.
Notwithstanding anything to the contrary in this Agreement, You may discuss the Services and/or disclose the
Deliverables to (i) relevant regulatory bodies with jurisdiction over the Bank, including the OCC or the Federal
Reserve, or (ii) to counsel retained by the Bank in connection with or related to the Foreclosure Review, without PwC's
prior written consent (including in connection with any regulatory oversight or regulatory enforcement activities
associated with matters covered by the Foreclosure Review, or with prior notification to PwC, in response to any court
order, any litigation discovery request or other formal legal process (e.g., subpoena in an administrative hearing
process) to which the materials are responsive). The Bank may provide the Deliverables to the relevant regulatory
bodies described above, including the OCC and the Federal Reserve, which will be granted full and timely access to the
Deliverables (and PwC's related workpapers upon request), which PwC understands will be subject to the OCC's and
the Federal Reserve's customary examination privilege and that the provision of such materials to the OCC or the
Federal Reserve will not waive any privilege or related defense that can be asserted by Citibank or by its counsel
You may disclose any materials that do not contain PwC's name or other information that could identify PwC as the
source (either because PwC provided a Deliverable without identifying information or because You subsequently
removed it) to any third party if You first accept and represent them as its own and You make no reference to PwC in
connection with such materials.
CITI-EL-00000033
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CITI-EL-00000034
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Our ability to achieve the proposed timeline may be impacted by the sample size, and Citibank's ability to provide the
necessary documentation in a timely manner. We will provide a dedicated team to complete all procedures for the
seventeen (17) sub-samples described in the "Sampling Methodology" section in 120 days as required by the OCC. In
the event that we anticipate that our timelines will be impacted we will notify You immediately. Any subsequent
"deep-dive" samples or additions to scope will likely require additional time, resources, fees and expenses. If such
scope addition(s) arise, we will provide time, fee and expense estimates to you once we understand the additional
review requirements.
Other Terms and Conditions
Indemnification
CITI-EL-00000035
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Your Responsibilities
Our role is advisory only. You are responsible for all management functions and decisions relating to this Agreement,
including evaluating and accepting the adequacy of the scope of the Services in addressing your needs. You are also
responsible for the results achieved from using the Services or Deliverables, and for implementing any plans or
recommendations provided by PwC hereunder. It is your responsibility to establish and maintain your internal
controls. You will designate a competent member of your management to oversee the Services. We expect that You
will provide timely, accurate and complete information and reasonable assistance, and we will perform the
engagement on that basis. In addition:
The Bank will supply to Independent Counsel a matrix ("CITI SUPPLIED LAW MATRIX") of State laws
drafted by outside counsel Hudson Cook; an outside counsel prepared matrix ("CITI SUPPLIED FEE
MATRIX") of State fees; and the Servicemembers Civil Relief Act ("SCRA"), and the U.S. Bankruptcy Code
during the first week of the engagement.
The Bank will provide all necessary population information in order to identify and facilitate sample selection
during the first week of the engagement. Citibank is responsible for the integrity of the population files used
to identify the sub-samples.
For those foreclosure actions selected in the samples, the Bank will provide all documentation necessary to
evaluate the action against the criteria - and such documentation will be accurate and complete in all material
respects. Due to the large number of files, we understand that the Bank anticipates a minimum of
approximately are necessary to provide the documentation.
The Bank is responsible for the accuracy of all data provided to PwC as part of this engagement as well as the
accuracy of any data embedded within the source systems that generate information provided to PwC as part
of this engagement.
The Bank is responsible for any potential remediation of Observations identified as part of the review.
The Bank will provide sufficient facilities for PwC to execute their assigned tasks. This may include, but is not
limited to, desks, telephones and networking facilities.
All assessments will assume that the documentation presented to the review team prior to the initiation of
work efforts is the only available documentation, except as otherwise agreed to by the parties. All
assessments will be performed based on the point in time of the initiation of our review activities.
PwC's Team Structure and Roles
The team that PwC commit to this ",><yprnp,nr has a combination of knowledge and experience with mortgage
default management and, in foreclosures. Additionally. the PwC team will be
with resources with slg;ml]ccmt t>v,,,,,r1,,,,f>C> in the evaluation and
('{Hnnl1!>,nrr> with of
not
HUD, With
to Consent Order this Foreclosure Team work on this Foreclosure Review, and PwC
ensure that all necessary resources are dedicated to the Foreclosure Review.
Prior to PwC's engagement with respect to the Consent Order responses ("Advisory Work"), PwC was engaged to assist
Citibank, N.A., with preparations for the Foreclosure Review. Since being engaged with respect to the Advisory Work,
PwC has maintained separate and independent teams for the Foreclosure Review (Foreclosure Review Team) and for
the Advisory Work (Advisory Work Team). All members of the Foreclosure Review Team and of the Ad'visory Work
Team are subject to the policies and procedures outlined in Exhibit B - Team Confidentiality and Separation
Requirements.
CITI-EL-00000036
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Fees and Expenses
Our fee estimate is based on the time required by our professionals to complete the engagement. Individual hourly
rates vary according to the experience and skill required. PwC's fees are based on the time required by the individual
specialists assigned to the engagement. Our fees for the above work will be billed on a time and materials basis and
will apply rates which will not exceed the following:
Director
Number of
Resources
2
are the review of the initial
only, an Quality Assurance review requested by the OCC, as well as compiling
and a report of the observations from the review. These fees do not contemplate additional procedures
that may be required by the recently issued guidance contained in Exhibit C: "ace and FRB Guidance - Financial
Injury or Other Remediation," if any. If supplemental sampling is required as a result of the initial review, we will
provide an additional fee estimate prior to the commencement of any work.
Overall fees associated with this engagement are dependent upon mUltiple key variables including but not limited to
the following: overall sample sizes, extent of Consent Order requirements to be assessed for all sample sizes, the hours
required to complete the Consent Order requirement file review for any given sample, the volume of claim/complaint
activity associated with the post-Consent Order complaint process, and the number of PwC team members involved
with the engagement.
Preliminary estimates sizes are included in this
indications of which Consent Order
letter. As ofthe date of the of this
the file for Consent Order
hours. volume expectations are unknown
activities discussed within this engagement letter.
complaints is approximatelyrl.l1lil1li
PwC also will bill You for our reasonable out-of-pocket expenses, any applicable sales, use or value added tax, and
internal per-ticket charges for booking travel. Invoices are due within 30 days of the invoice date. Reasonable out-of
pocket expenses will include any fees and/or related reasonable out-of-pocket expenses of external counsel to be
engaged by PwC and/or any other professional advisors deemed necessary to meet the OCC requirements as described
within the Consent Order and/or related verbal and written guidance.
CITI-EL-00000037
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Dispute Resolution
Any unresolved dispute relating in any way to the Services or this Agreement shall be resolved by arbitration. The
arbitration will be conducted in accordance with the Rules for Non-Administered Arbitration of the International
Institute for Conflict Prevention and Resolution then in effect. The arbitration will be conducted before a panel of
three arbitrators. The arbitration panel shall have no power to award non-monetary or equitable relief of any sort. It
shall also have no power to award damages inconsistent with the Limitations of Liability provisions below. Judgment
on any arbitration award may be entered in any court having jurisdiction. All aspects of the arbitration shall be treated
as confidential. You accept and acknowledge that any demand for arbitration arising from or in connection with the
Services must be issued within one year from the date either You became aware or should reasonably have become
aware of the facts that give rise to our alleged liability and in any event no later than two years after any such cause of
action accrued.
This Agreement and any dispute relating to the Services will be governed by and construed, interpreted and enforced
in accordance with the laws of the State of New York, without giving effect to any provisions relating to conflict of laws
that require the laws of another jurisdiction to apply.
Other PwC Firms
PwC is the U.S. firm of the global network of separate and independent PricewaterhouseCoopers firms (exclusive of
PwC, the "Other PwC Firms"). During its performance of the Services, PwC may, subject to applicable objectivity and
independence requirements, (i) draw on the resources of and subcontract to its subsidiaries, Other PwC firms and/ or
third party contractors (which provide PwC internal business, administrative, technical, outsourcing, regulatory
compliance functions or other "back office" support in connection with the Services), and/or (ii) subcontract to other
third party subcontractors, in each case of (i) or (ii), within or outside of the United States (and in each case of (i) or
(ii), a "PwC Subcontractor"). You agree that PwC may provide infornlation PWC receives in connection with this
Agreement to the PwC Subcontractors for such purposes. PwC will be solely responsible for the provision of the
Services (including those performed by the PwC Subcontractors) and for the protection of information provided to the
PwC Subcontractors. The PwC Subcontractors and theirs and PwC's partners, principals or employees (collectively the
"Beneficiaries") shall have no liability or obligations arising out of this Agreement. You agree to: (a) bring any claim or
other legal proceeding of any nature arising from the Services against PwC and not against the Beneficiaries; and
(b) ensure or procure your consolidated subsidiaries or affiliates receiving services under this Agreement ("your
Subsidiaries") do not assert any such claim or other legal proceeding against PwC or the Beneficiaries. The delivery of
the Services is governed by the terms of this Agreement (including the liability limitations herein); your Subsidiaries
should notify You of any disputes or potential claims arising from the Services. PwC disclaims any contractual or other
responsibility or duty of care to any of your subsidiaries or affiliates that do not receive Services under this Agreement
and are not bound to the terms and conditions of the Agreement. PwC agrees to: (a) bring any claim or other legal
proceeding of any nature arising from the Services against You and not your Subsidiaries or your directors,
officers or and ensure or procure that none of PwC's or the Beneficiaries assert any such
claim other Subsidiaries or Subsidiaries' fiir""T{\rC
own also is intended for
Other Matters
PwC is owned by professionals who hold CPA licenses as well as by professionals who are not licensed CPAs.
Depending on the nature of the services we provide, non-CPA owners may be involved in providing Services to You
now or in the future.
or transfer this Agreement, or any rights, obligations, claims or proceeds from
written consent of the other and without such
CITI-EL-00000038
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executing this Agreement, this Agreement shall be effective as of the date we began the Services. Your Client agrees we
may use their name in experience citations and recruiting materials. This Agreement supersedes any prior
understandings, proposals or agreements with respect to the Services, and any changes must be agreed to in writing
through an amendment to this Agreement or a change order.
By entering into this Agreement, You are binding your Subsidiaries to the extent that you have authority to do so. We
disclaim any contractual or other responsibility or duty of care to any other subsidiaries or affiliates.
*****
We are pleased to have t.ortuni
B
to provide services to You. If you have any questions about this Agreement,
please discuss them with or . If the Services and terms
outlined in this Agreement are acceptable, please sign one copy of this Agreement injllit.h.eliisIPiaciie.p.rovided and return it
to the undersigned. You may return the signed copy to me by mail or air courier to
PricewaterhouseCoopers LLP, by.fa.c.s.im.ile.to.m.y.a.ttlie.n.tl. 0lin.a.t
_ or attached as a pdf, jpeg or similar file type to an e-mail to me at.
Very truly yours,
Date: September 2, 2011
Lkf
ACKNOWLEDGED AND AGREED:
Citibank, N.A.
Signature of client official:
Please print name:
Title:
Date:
CITI-EL-00000039
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Exhibit A - Permissible Fees
The potential fees include:

advertising / publication fee

appraisal / EPO costs

attorneys' fees

copying costs

court / filing fees

statutory mailing costs

mailing / courier fees

NSF fees

posting notice of default / sale

postponement fee

process / service / summons fee / costs

property inspection fees

property preservation fees

recording / reconveyance fees

rescission fees

sale fees

sheriffs fees for conducting sale

sheriffs fees for securing property

skip trace fees

title / deed costs

sale
CITI-EL-00000040
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Exhibit B - PwC Foreclosure Review Team Confidentiality and Separation Requirements
PwC has been engaged by Citigroup in support of its response to the mortgage servicing Consent Orders
issued by the Federal Reserve Bank (FRB) and the Office of the Comptroller of the Currency (OCC). The OCC
Consent Order includes Article VII - Foreclosure Review which requires the engagement of an "Independent
Consultant" to conduct an independent review of certain foreclosure actions (Foreclosure Review).
Prior to PwC's engagement with respect to the Consent Order responses ("Advisory Work"), PwC was engaged to
assist Citibank, N.A, with preparations for the Foreclosure Review. Since being engaged with respect to the Advisory
Work, PwC has maintained separate and independent teams for the Foreclosure Review (Foreclosure Review Team)
and for the Advisory Work (Advisory Work Team). All members of the Foreclosure Review Team and of the Advisory
Work Team are subject to the policies and procedures outline below.
Policies
With respect to the Foreclosure Review and the Advisory Work, PwC has in place and will maintain an ethical wall
(e.g. firewall) that is comprised of the following features:
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Procedures to Implement Policies
The foregoing policies are implemented by:
Providing a copy of this policy memorandum to each member of the Foreclosure Review Team and each
member of the Advisory Work Team.
Sending periodic reminders to each active member of the Foreclosure Review Team and the Advisory Work
Team of the policy and the team member's obligations under this policy.
Tracking and monitoring the staffing of the Foreclosure Review Team and the Advisory Work Team through
the central PMO team supporting Project Chorus to manage the deployment of PwC personnel consistent
with this policy.
CITI-EL-00000042
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Exhibit C - OCC and FRB Guidance - Financial Injury or Other Remediation
OCC and FRB Guidance Financial Injury or Other Remediation
The April 13,2011 Consent Orders require the Independent Consultants (lCs) to make certain
findings in conjunction with the Foreclosure Reviews and to prepare a report of their findings
("Foreclosure Report,,).
2
The Consent Orders first require the IC to make a determination as to
whether the servicer committed any "errors, misrepresentations, or other deficiencies" (as defined
in Section II); and second, whether any such errors, misrepresentations, or other deficiencies
"resulted in financial injury" to the borrower or mortgagee/owner of the mortgage loan. For this
purpose, "financial injury" to the borrower or the mortgagee is defined as monetary harm directly
caused by errors, misrepresentations or other deficiencies identified in the Foreclosure Review.
Monetary harm does not include physical injury, pain and suffering, emotional distress or other
non-financial harm or financial injury that did not result as a direct consequence of errors,
misrepresentations or other deficiencies identified in the Foreclosure Review. However,
financial injury does include monies actually expended by the borrower or mortgagee that
directly relate to the foreclosure action, proceeding, or sale and otherwise would not have been
required but for the error, misrepresentation or other deficiency by the servicer identified in the
Foreclosure Review.
The Consent Orders require each institution to submit a plan, subject to approval by the OCC
and/or FRB, to compensate or remediate financially injured borrowers, based on the findings
contained in the IC's Foreclosure Report. While the Consent Orders contemplate compensating
harmed borrowers who have suffered financial injury, the Orders also contemplate remedial
action other than, or in addition to, compensation in other appropriate circumstances. As such,
for each file reviewed in the Foreclosure Review, the IC must first identify (and include in the
Foreclosure Report) their findings regarding any servicer error, misrepresentation, or other
deficiency. The IC must then identify (and also include in the Foreclosure Report) any financial
injury that has been suffered by the borrower as a result of the identified error, misrepresentation,
or other and injury that may be by the borrower absent action by
to remediate or cure identified error, misrepresentation, or other deficiency. The
IC Foreclosure Report must include recommended remediation to be made and/or compensation
to be paid by the institution to borrowers who the IC has identified as having suffered financial
injury or who may suffer financial injury.
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The following scenarios provide guidance as to what may constitute financial injury that requires
compensation to the borrower or where other borrower remediation by the servicer may be
required to avoid financial injury. These scenarios are not exhaustive, and should be viewed as
setting forth the principles that les should apply when determining financial injury attributable to
errors, omissions, or other deficiencies by the servicer. The Ie's determination regarding the
presence or absence of financial injury or whether compensation or other remediation is required
must, of course, take into account and be based on the specific facts and circumstances
surrounding each borrower's individual case.
I. Financial Injury Present or Other Remediation Required
Errors, misrepresentations, or other deficiencies that may result in financial injury and may
require compensation to the borrower or action by the servicer to remediate or cure the error,
misrepresentation, or deficiency, include the following. The aee and FRB stress that this list is
not intended to be exhaustive, but rather contains examples highlighting the principles that the
les should use when assessing financial injury. In these examples, if a sale of the borrower's
home already has occurred, the Ie must determine whether the servicer should compensate the
borrower for financial injury and if any other action by the servicer is required to remediate or
cure the error, misrepresentation, or deficiency. If the sale has not yet occurred, the Ie must also
determine whether any payment to compensate for financial injury or other action by the servicer
is required to remediate or cure the error, misrepresentation, or deficiency.
1) The borrower was not in default pursuant to the terms of the note and mortgage at the
time the servicer initiated the foreclosure action.
2) The servicer initiated foreclosure or conducted a foreclosure sale in advance of the time
allowed for foreclosure under the terms of the note and mortgage or applicable state law.
3) The borrower submitted payment to the servicer sufficient to cure the default pursuant to
the terms of the note and mortgage, but the servicer returned the payment in contravention
the terms of the note or mortgage, state or federal law , or the stated policy
payments in default
The servicer misapplied borrower payments, did not timely credit borrower payments
(including failure to properly account for funds in suspense), or did not correctly calculate
the amount actually due from the borrower, in contravention of the terms of the note and
mortgage, state or federal law, investor requirements, or the servicer's stated policy
covering application of payments.
The borrower paid a or penalty that was impermissible, as defined II.
CITI-EL-00000044
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6) A deficiency judgment was obtained against the borrower that included the assessment of
a fee or penalty that was impermissible, as defined in Section II.
7) The servicer placed an escrow account on the borrower's mortgage and the placement
resulted in monies paid by the borrower into escrow in contravention of the terms of the
note or mortgage, state or federal law, or the servicer's stated policy covering escrow
accounts.
8) The servicer placed insurance on the borrower's mortgage and the placement resulted in
monies paid by the borrower towards insurance in contravention of the terms of the note
or mortgage, state or federal law, or the servicer's stated policy covering placed
insurance.
9) The servicer miscalculated the amount due on the mortgage and secured a judgment
against the borrower for an amount greater than the borrower owed.
10) A borrower's remittance of funds to a third party acting on behalf of the servicer (e.g. law
firm) was not credited to the borrower's account.
11) The borrower was performing under the terms of an approved trial loan modification or
an approved permanent loan modification, but the servicer proceeded to foreclosure in
contravention of the terms of the modification offered by the servicer to the borrower.
3
12) A borrower was denied a modification in contravention of the terms of the governing
modification program or the servicer's stated policy covering modifications.
13) There is evidence that the borrower provided or made efforts to provide complete
documentation necessary to qualify for a modification within the period such
was required to be provided by the modification "rrHY>"'>yy,
of the terms
stated policy covering modifications.
14) The servicer initiated foreclosure or completed a foreclosure sale without providing
adequate notice as required under applicable state law.
pursuant to this Guidance in connection with the Consent Order
CITI-EL-0000004S
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15) The servicer foreclosed on or sold real property owned by an active military
servicemember in violation of the Servicemembers Civil Relief Act (SCRA). (This
provision applies to loans originated before the servicemember's active military service
and prohibits foreclosures and foreclosure sales of such property at any time during the
borrower's period of active military service and for 9 months thereafter, unless an
exception applies pursuant to the SCRA).
16) The servicer did not lower the interest rate in accordance with the requirements of the
SCRA on a mortgage loan entered into by a military servicemember, or by the
servicemember and his or her spouse jointly. (This provision applies where the borrower
provided written notice of military service pursuant to the SCRA for loans originated
before the borrower entered into military service; the effective rate on the loan must be
lowered to a rate not in excess of 6% per year during the borrower's period of military
service and for 1 year thereafter, unless an exception applies pursuant to the SCRA).
17) The servicer failed to honor a borrower's bona fide efforts to redeem a sale under
applicable state law during the redemption period.
18) The borrower was protected by the automatic stay under the bankruptcy code and a court
had not granted a request for relief from the automatic stay or other appropriate exception
under the bankruptcy code.
19) The borrower was making timely pre-petition arrearage payments required under an
approved bankruptcy plan and was current with their post-petition payments.
20) The borrower: 1) purchased a borrower payment protection plan; 2) was or should have
been receiving benefits under the plan; and 3) those benefits were not applied pursuant
to the contract terms.
21 The was not the proper party, or authorized to act on behalf of the proper
the applicable state law to on the borrower's home this resulted in or
may result in multiple foreclosure actions or proceedings.
22) The servicer failed to comply with applicable legal requirements, including those
governing the form and content of affidavits, pleadings or other foreclosure-related
documents (to include improperly notarized documents or the practice of "robo-signing"
generally), where such failure directly contributed to: (1) the borrower paying fees,
CITI-EL-00000046
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otherwise would not have met the requirements for initiating such an action or
proceeding.
II. Other Definitions
"Certain residential foreclosure actions" - The term "certain residential foreclosure
actions" means foreclosure actions initiated or completed on owner-occupied, 1-4 family
dwellings by divisions of the institution that process first lien mortgage foreclosures. This
term includes mortgages secured by individual condominium dwelling units and individual
cooperative housing units. This term also includes mobile homes, house boats, and other
owner-occupied dwellings that are treated as "real estate" or "real property" under applicable
state law pertaining to foreclosure.
"Impermissible" - The term "impermissible" as applied to a fee and/or penalty charged to a
borrower's account, means a fee or penalty that is anyone or more of the following:
1) Exceeds the limits established by applicable state law, federal law or the borrower's
mortgage instruments, including as to type, amount, or sum of fees and/or penalties.
2) In the case of the OCC Consent Orders, is not "reasonable and customary," or a fee
that is assessed at an "excessive" frequency. The term "reasonable and customary"
as applied to a fee and/or penalty charged to a delinquent borrower's account means
that institutions may only assess a fee for services actually rendered, and may only
assess a fee or collect a monetary penalty that does not exceed the lesser of (a) any fee
limitation or allowable amount for service under applicable state or federal law; (b)
any published, pre-established fee limitation or allowable amount for the service
under the guidelines for the applicable government-sponsored enterprise investing in
the loan or the government agency insuring the loan; and (c) the market rate for the
service (as defined under the amount or rate that is "customarily charged in the
market for such fee or penalty" below), The term "excessive" means any that
ALLC.. " the amount permitted by the applicable state
or federal law, or investor requirements. frequency of a fee means the same
or a similar that is more than or appropriate completion of the
underlying service.
3) In the case of the FRB Consent Orders, is "otherwise unreasonable." A fee or
penalty is "otherwise unreasonable" if it was assessed: (a) for the purpose of
protecting the secured party's interest in the mortgaged property, and the fee or
CITI-EL-00000047
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services performed and the fee charged was substantially in excess of the fair market
value of the service; (c) for services performed, and the services were not actually
performed; or (d) at an amount or rate that exceeds what is customarily charged in the
market for such a fee or penalty, and the mortgage instruments or other documents
executed by the borrower did not disclose the amount or rate that the lender or
servicer would charge for such a fee or penalty.
i) A fee charged for services performed is not "substantially in excess of the fair
market value of the service" if it exceeds by no more than 10 percent the
maximum allowable fee under the "applicable investor guide" or, if there is no
"applicable investor guide", the guide published by Fannie Mae or Freddie Mac
that would apply if Fannie Mae or Freddie Mac were the investor.
ii) A fee or penalty does not "exceed" the amount or rate that is "customarily
charged in the market for such fee or penalty" if the fee or penalty does not
exceed the maximum allowable fee under the "applicable investor guide" or, if
there is no "applicable investor guide", the guide published by Fannie Mae or
Freddie Mac that would apply if Fannie Mae or Freddie Mac were the investor.
iii) "Applicable investor guide" means investor guides issued by Fannie Mae,
Freddie Mac, the Veterans Administration, and the Department of Housing and
Urban Development.
"Errors, misrepresentations, or other deficiencies." The terms "errors, misrepresentations,
or other deficiencies" means those matters discovered during the Foreclosure Review as set
forth in Article VII(3)(a)-(g) of the OCC's Orders, OTS Order paragraph 16(a)-(g), and
Paragraphs 3(a)(i)-(vii) of the Board's Orders. "Errors" includes miscalculation of fees or
other charges, where the total aggregate miscalculated fees or charges applied to the borrower
exceeds $99.00.
CITI-EL-00000048

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