GAO Report on Foreclosure Reviews Misses How Regulators Conspired with Banks Against Homeowners
I suppose one has to be grateful for any official pushback against failed regulatory initiatives, such as the just-released GAO report criticizing the Independent Foreclosure Reviews. Of course, in this instance, I am charitably assuming that these reviews were a failure. They have certainly proven to be an embarrassment to the lead actor, the OCC, which has tried to maintain as low a profile as possible on this topic rather than offer any defenses.
But “failure” assumes that the OCC and the Fed did not achieve their real objective, which was to protect the banks. That hardly appears to be the case. The short story of the reviews is that to dampen down criticism of the many foreclosure horrors revealed in the media and in courtrooms all over the country, borrowers who were foreclosed on or had foreclosure actions underway in 2009 and 2010 were promised an independent review and compensation if they were found to have suffered financial harm. And even though the abrupt termination of the reviews has left the regulators with a lot of egg on their face, the result is that the banks paid a lot less than if the reviews had lived up to their billing.
Maxine Waters, to her credit, tried to put a little heat under the OCC and Fed by requesting that the GAO look into the matter. But as Dave Dayen stressed in his commentary on the GAO report, the overseer was blinkered in its approach:
Furthermore, its narrow scope – GAO only looked at the regulators’ design and ovesight of the foreclosure reviews, rather than what the independent reviewers did, and in fact they used the bank consultant reviewers as primary sources – tends to give a very circumscribed picture of the reviews. You could even say that this report will help get the bank consultants off the hook by putting the blame on OCC and the Fed.
The biggest problem, though, is the GAO was tasked only to do a very high level review of process, which meant it looked for how procedural weaknesses led to bad outcomes.
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If the bank over states your expenses in almost every category of your loan and it ends up in a deficiency then you have been directly harmed even though you did not pay out cash,as your debt obligation increased and that is financial harm. Asking victims to say how they have been harmed, to be compensated, when they do not have access to the records, speaks for itself. How many Force Placed Insurance Policies, where JPMC was paid 75% commission, are in deficiency judgements and people are making payments on this 75% commission? Was this for reinsurance where JPMC was paid a high commission to prevent claims on the policy? Did this just set up an empty shell for billing because JPMC would not file claims that would effect there commission? Did the 75% commissions get re-embursed with Fannie bail out money and the banks write this amount off as a lose when borrowers file bankruptcy? Just asking???????? My loan was billed for mediation that never took place, drive by inspections after my house sold, a force placed insurance policy placed on my home after it sold, excess attorney fees etc……. this is the kind of thing that ends up in deficiencies and I was placed in a payment plan for this until I am well over 100 years old. I will let you know what I get from the Independent Foreclosure Review where I sent in 100’s of pages, if they are still in my file. It would have helped more if the GAO would have stepped in when the banks were asked to go find a friend and tell them what they are doing wrong so they can return the money. That would not have been considered being proactive stepping in at that point. Love the GAO and CFPB you are our only hope and you must be so overwhelmed. 🙂