Pending Foreclosure Fraud Settlement Achieves New Level of Abject Regulatory Failure
Before we get any further, we need to stress how patently ridiculous these cost claims are. Notice that one of the things that this review process claims to be doing is reviewing whether borrowers were charged incorrectly. Reviewing the loan files is not going to get you there. You could either check a random sample of consumer records (which would be time consuming but give you insights you could not get any other way) or audit servicer software to see how payments were applied and processed. We’ve discussed for a long time that servicer-driven foreclosures (due to illegal application of charges to borrowers) are a big part of the problem; foreclosure defense lawyers say they represent 50% to 70% of the cases they handle. But this process was never set up properly to diagnose that.
Second is the absurdity of the “up to $250 an hour” and “up to 20 hours a loan file” claims. We’ve spoken at length to mortgage experts; it should take someone competent no more than an hour on average to review a file because there aren’t than many items to review if you are looking for frauds on borrowers as opposed to going on a treasure hunt for file errors, the overwhelming majority of which don’t have any implications as far as borrower harm is concerned.
We interviewed a partner at SolomonEdwards, a firm that has mortgage file reviews and remediation as a line of business and had 600 people deployed on OCC reviews. We deemed the process to be overkil. Even so, they were spending 3 hours on average, vastly less than the level the Times implied
Full post here…