The more that surfaces from the scrapped “Independent Foreclosure Review” of improper evictions and messed-up documentation, the more troubling the findings.
The latest: big banks wrongfully foreclosed on more than 700 military members and seized homes from about two dozen other borrowers who were current on their mortgage payments, the New York Times reported.
Bank of America, Citigroup, JPMorgan Chase and Wells Fargo found the wrongful foreclosures while analyzing files as part of a $9 billion settlement reached with the Federal Reserve and the Office of the Comptroller of the Currency.
The settlement replaced the long-delayed and costly “Independent Foreclosure Review,” which attempted to uncover wrongful or improper actions against up to 4 million homeowners in 2009 and 2010. More than $1.5 billion had been spent on the reviews before the settlement was reached.
In January, regulators ordered the banks to identify military members and other borrowers who were evicted in violation of federal law.
The Times reports that the analysis by the banks was turned over to regulators in recent days. It provides the best glimpse so far into the extent of botched foreclosures amid the collapse of the housing market.
Homeowners advocates have been opposed to the settlement since it was announced in January. Lenders previously conceded that they had used erroneous documents to push through foreclosures. But the banks claimed borrowers were rarely evicted by mistake, including military personnel protected by federal law.
Consumer groups said the initial Independent Foreclosure Review should have been fixed and strictly enforced to ensure that banks are held accountable for wrongful foreclosures.
In a hearing before the House Committee on Financial Services last week, Fed Chairman Ben Bernanke only spoke briefly about the 18-month failed reviews of foreclosures undertaken by more than a dozen mortgage services.
But he admitted that the reviews went on for too long, cost too much and did not yield sufficient data.
“They (the consultants) had not made all that much progress, frankly, and at a very expensive cost per file evaluated,” Bernanke explained. “We were on a track where the money going to the consultants would be some multiple of the money that was suppose to go to the borrowers, and we take responsibility for this.”
In another recent revelation tied to the reviews that were conducted during the 18 months, the Wall Street Journal reported that the figure given by the Office of the Comptroller of the Currency — an error rate of just 4.2 percent among the self-selected and flagged foreclosures under review — ignored big variations between servicers.
More than 11 percent of files examined for Wells Fargo & Co. and 9 percent of those for Bank of America Corp. had errors that would have required compensation for homeowners, said people who have reviewed the figures, the Journal reported.
From the Journal:
A narrower sample of files — representing cases selected by outside consultants — showed error ratios of 21% for Wells Fargo and 16% for Bank of America, the people said. The OCC findings appear skewed by the outsize contribution of one bank, J.P. Morgan Chase & Co., which reported an error rate far below rivals that oversaw a much larger universe of loans.