SALON

Monday, Jan 14, 2013 7:10 PM UTC

Insiders reveal deep flaws with foreclosure review project

Reports from insiders say system to find justice for burned homeowners was "a facade"

By

Topics: Banking, Foreclosures, Mortgage Crisis, Federal Reserve, Bank of America, Wall Street, ,

Insiders reveal deep flaws with foreclosure review project (Credit: Wikimedia)

Last week Salon reported that 10 major banks, including Bank of America, Wells Fargo and JPMorgan Chase, agreed to pay a settlement of $3.3 billion in cash to 3.8 million mortgage borrowers who were foreclosed upon in 2009 or 2010. The settlement came after the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board closed down a vast project of independent reviews aimed to correctly determine how homeowners were burned and how much compensation they should receive.

The independent auditing project was deemed too costly, so instead — to the dismay of a number of commentators and homeowner advocates — the mortgage companies themselves will determine distribution of the $3.3 billion settlement sum. “It is just incomprehensible to me that they could not find a third party that has the wherewithal and independence to fairly determine what the damage is to homeowners,” John Taylor, president of the National Community Reinvestment Coalition, said when the settlement was announced.

On Monday, however, the HuffPo’s Ben Hallman published a lengthy report highlighting how the independent review process had been “doomed from the start.” Hallman reports:

It was called the Independent Foreclosure Review, and it was one of the most ambitious and costly auditing projects in U.S. history.

It was also, some of the contractors soon came to believe, a fiasco in the making. At Bank of America, contract employees were to answer more than 2,000 questions written by Promontory Financial, the consulting firm the bank hired to audit its mortgage loan files. Those questions, the contractors said, were confusing and open to interpretation. Training was spotty and mistakes were frequent, they said. Sometimes, when they noted bank-caused mistakes, they were told by Bank of America managers not to believe their own eyes.

… In ending the reviews, the bank regulators said that they were looking out for the best interests of homeowners, and that the new deal would speed payments, with checks arriving in late March. But inside observers who shared their experience with The Huffington Post and other regulatory experts familiar with the process said that the decision to scrap the reviews was also a tacit admission that the program, which had cost billions of dollars and one year of intense work, was too broken to save. Had the reviews continued, insiders note, they would have produced results compromised by systemic mistakes and errors made along the way by the contract employees at banks and at the auditors.

Meanwhile, with the faulty, costly review project terminated, there remain unanswered questions as to how the OCC and the Fed reached the settlement agreement with the major banks and how the funds will be fairly distributed.

“I do not know what the rush was to make this settlement without answering these key questions, and although I look forward to obtaining information about how this deal may assist homeowners, I have serious concerns that this settlement may allow banks to skirt what they owe and sweep past abuses under the rug without determining the full harm borrowers have suffered,” said Rep. Elijah Cummings, D-Md., the ranking Democrat on the House Oversight and Government Reform Committee.

Natasha Lennard is an assistant news editor at Salon, covering non-electoral politics, general news and rabble-rousing. Follow her on Twitter @natashalennard, email nlennard@salon.com. More Natasha Lennard.

Next Article

Related Stories

More Related Stories

Featured Slide Shows

The week in 10 pics

close X
  • Share on Twitter
  • Share on Facebook
  • Thumbnails
  • Fullscreen
  • 1 of 11
  • This photo. President Barack Obama has a laugh during the unveiling of the George W. Bush Presidential Center in Dallas, Tx., Thursday. Former first lady Barbara Bush, who candidly admitted this week we've had enough Bushes in the White House, is unamused.
    Reuters/Jason Reed

  • Rescue workers converge Wednesday in Savar, Bangladesh, where the collapse of a garment building killed more than 300. Factory owners had ignored police orders to vacate the work site the day before.
    AP/A.M. Ahad

  • Police gather Wednesday at the Massachusetts Institute of Technology to honor campus officer Sean Collier, who was allegedly killed in a shootout with the Boston Marathon bombing suspects last week.
    AP/Elise Amendola

  • Police tape closes the site of a car bomb that targeted the French embassy in Libya Tuesday. The explosion wounded two French guards and caused extensive damage to Tripoli's upscale al-Andalus neighborhood.
    AP/Abdul Majeed Forjani

  • Protestors rage outside the residence of Indian Prime Minister Manmohan Singh Sunday following the rape of a 5-year-old girl in New Delhi. The girl was allegedly kidnapped and tortured before being abandoned in a locked room for two days.
    AP/Manish Swarup

  • Clarksville, Mo., residents sit in a life boat Monday after a Mississippi River flooding, the 13th worst on record.
    AP/Jeff Roberson

  • Workers pause Wednesday for a memorial service at the site of the West, Tx., fertilizer plant explosion, which killed 14 people and left a crater more than 90 feet wide.
    AP/The San Antonio Express-News, Tom Reel

  • Aerial footage of the devastation following a 7.0 magnitude earthquake in China's Sichuan province last Saturday. At least 180 people were killed and as many as 11,000 injured in the quake.
    AP/Liu Yinghua

  • On Wednesday, Hazmat-suited federal authorities search a martial arts studio in Tupelo, Miss., once operated by Everett Dutschke, the newest lead in the increasingly twisty ricin case. Last week, President Barack Obama, Sen. Roger Wicker, R.-Miss., and a Mississippi judge were each sent letters laced with the deadly poison.
    AP/Rogelio V. Solis

  • The lighting of Freedom Hall at the George W. Bush Presidential Center Thursday is celebrated with (what else but) red, white and blue fireworks.
    AP/David J. Phillip

  • Recent Slide Shows

  • Share on Twitter
  • Share on Facebook
  • Thumbnails
  • Fullscreen
  • 1 of 11

Related Videos

Comments

 4 Comments

Comment Preview

Your name will appear as username

You may use these HTML tags and attributes: <a href=""> <b> <em> <strong> <i> <blockquote>

follow salon

Most Read

Popular on Reddit

links from salon.com

From Around the Web

Presented by Scribol
listener_new_rect The Listener: "The Shelter Cycle": Raised in a cult

Recommendations