Independent Foreclosure Review was Unwieldy, Poorly Monitored: GAO

Independent Foreclosure Review was Unwieldy, Poorly Monitored: GAO
Federal Reserve Chairman Ben Bernanke (left) and Thomas Curry, U.S. Comptroller of the Currency.

A $2 billion effort by regulators to have banks and hired consultants review botched U.S. foreclosures was poorly executed with limited monitoring, ending without compensation for victims despite more than a year of tedious searches through thousands of files.
“Regulators may have been able to better define the scope of activities and issue more complete guidance…” said the report Thursday by the Government Accountability Office.
The report also cited limited communication with borrowers and the public that “adversely impacted transparency and public confidence.”
The GAO also found that regulators did not consult with community groups, “such as national organizations representing housing counselors that have worked with individual borrowers on their loan modification and loss mitigation applications.”
The so-called Independent Foreclosure Review launched in 2011 lacked strong, focused and consistent guidance by banking regulators as they tried to uncover the depth of errors or wrongdoing in foreclosure actions against 4.2 million borrowers in 2009 and 2010 — many of whom lost their homes.
No one, the GAO indicates, including the overseeing regulators at the Office of the Comptroller of the Currency and the Federal Reserve, seemed to grasp the enormity of the task and the number of players involved in the process that would ultimately doom the vast majority of the reviews.
By January of this year, regulators opted to enter into consent orders with 13 mortgage servicers, many of them represented by the largest U.S. banks, including JPMorgan Chase, Bank of America, Wells Fargo and Citibank.
Payouts of up to $125,000 for the most serious cases of wrongful evictions are now expected to begin this month, according to postcards that were sent out by the paying agent for the regulators, Rust Consulting.
Third-party consultsants told the GAO that the initial Independent Foreclosure Review last year became too complicated and time-consuming.
“Consultants told us that some files may contain as many as 50 documents, potentially comprising more than 2,000 pages,” the GAO said. “Consultants also stated that the reviews were challenging because they covered such a wide variety of complex issues, including different state foreclosure laws, federal laws and regulations, and guidelines for federal and servicers’ proprietary loan modification programs.”
The process became bogged down through test questions for determining foreclosure documentation errors.
Consultants developed a series of test questions — generally yes or no questions — to identify potential errors. The number of test questions consultants used to conduct the file reviews varied. For example, one consultant said that their group had about 2,600 test questions, “with more than 4,000 discrete steps, while another consultant told us they had 16,000 test questions.”
The GAO report did say that regulators had “a robust system of regular meetings” involving third-party consultants, servicers, and regulators’ staff to discuss challenges with the files and help promote consistency among the reviews.
However, the GAO’s analysis found that the regulators’ “sampling approach” used as a guide for consultants did not include mechanisms to facilitate the regulators’ oversight.
For example, there was no objective method for regulators to use in determining “if consultants had conducted sufficient reviews and could stop their review activities, except in those cases where there were few or no errors.”
According to third-party consultants, regulators missed key opportunities by not requiring development of “common criteria or reference materials” that would serve as the basis for the foreclosure review process.
“Third-party consultants and their respective law firms we interviewed told us that they each developed their own test questions used by their file reviewers to determine whether any errors or financial harm occurred,” the GAO said.
Both Federal Reserve Chairman Ben Bernanke and Thomas Curry, U.S. Comptroller of the Currency, have testified before congress about the failure of the foreclosure reviews:

2 thoughts on “Independent Foreclosure Review was Unwieldy, Poorly Monitored: GAO

  • May 30, 2013 at 4:30 pm
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    The Independent Foclosure Review turn out to be a big joke and once again gave the big banks no accountability, and once again steal from the people.
    Servicer charged servicemembers interest
    rates that exceed SCRA Section 527 limits**
    In process 33 >=$300 317 >=$300 350
    Completed 11 >=$300 63 >=$300 74
    Servicer initiated or completed foreclosure on
    borrower who was not in default*
    In process 46 $5,000 543 $5,000 589
    Rescinded 8 $15,000 29 $15,000 37
    Completed 8 $125,000 45 $125,000 53
    Servicer initiated or completed foreclosure on
    borrower who was protected by federal
    bankruptcy law
    In process 2,401 $7,500 19,860 $3,750 22,261
    Rescinded 28 $7,500 160 $3,750 188
    Completed 763 $62,500 5,075 $31,250 5,838
    Servicer completed foreclosure on borrower
    who was meeting all requirements of
    documented forbearance plan(applies only to
    rescinded or completed foreclosures)
    Rescinded 50 $6,000 185 $3,000 235
    Completed 162 $24,000 684 $12,000 846
    Servicer failed to convert borrower to
    permanent modification after three successful
    payments under a written trial-period plan
    In process 461 $6,000 2,436 $3,000 2,897
    Rescinded 31 $6,000 91 $3,000 122
    Completed 239 $50,000 718 $25,000 957
    Servicer completed foreclosure on borrower
    who was performing all requirements of the
    written trial-period plan
    Rescinded 29 $6,000 126 $3,000 155
    Completed 163 $50,000 477 $25,000 640
    Modification request approved In process 118,177 $500 746,894 $300 865,071
    Rescinded 2,617 $500 9,229 $300 11,846
    Completed 39,368 $500 195,448 $300 234,816
    Modification request denied In process 62,557 $2,000 432,595 $1,000 495,152
    Rescinded 1,539 $2,000 6,007 $1,000 7,546
    Completed 60,251 $6,000 309,597 $3,000 369,848
    WE have proof that we followed all requirements by our bank, and yet the screwed it up, and we ended up paying for 5 months of modification and we were denied, but since our bank settled and where we should have ended up with $50,000 we ended up with $3,000 and no one verified what amount we should have be compensated for.

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