Download Engagement letter: PricewaterhouseCoopers for US Bank PDF

TitleEngagement letter: PricewaterhouseCoopers for US Bank
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Page 1

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
www.pwc.com/us

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Page 2

OCC Engagement Letter - September 28, 2011 Submission

Privileged & Confidential Supervisory OCC Information


pwc �

Scope ofOur 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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Page 24

pwc

Potential Higher Estimated
Risk Segmentations Population Size

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

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

Sample Size Basis for Higher Risk Segmentation Consent Order
Approach Requirements

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.

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Page 25

pwc

Potential Higher Estimated
Risk Segmentations Population Size

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

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

Sample Size Basis for Higher Risk Segmentation Consent Order
Approach Requirements

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
requirements for samples generated under
both the initial base sample determinations
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

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Page 47

OCC Engagement Letter - September 28, 2011 Submission

Privileged & Confidential Supervisory OCC In/ormation


pwc �

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Page 48

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

pwc

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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