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GAO Calls Out Bank Regulators For Mucking Up Foreclosure Reviews

consumerist.comApr 4, 2013

By Chris Morran

Back in April 2011, in the wake of the robosigning scandal and in light of numerous instances of erroneous seizures, the Office of the Comptroller of the Currency and the Federal Reserve System ordered independent reviews of the foreclosure process at the country’s 14 largest mortgage servicers. Now, two years on, the Govt. Accountability Office is saying these regulators allowed the review process to become inconsistent and overly complex.

In a report [PDF] released this morning, the GAO criticizes both the OCC and the Fed for providing “overly broad guidance and limited monitoring for consistency” to the review process, making it difficult to reach the reviews’ intended goals of identifying harmed borrowers and preventing homeowners from faulty foreclosures going forward. Additionally, GAO found that regulators were revising the already broad guidance throughout the process, resulting in delays.

The size of the project presented problems of its own, with as many as 4.3 million foreclosure files to be reviewed. Furthermore, the number of parties involved in the process — 14 servicers, 14 third-party consultant teams from 7 different consulting and accounting firms, some with subcontractors, and more than 10 third-party law firms — only made communication and consistency more difficult.

This lack of oversight and variety of review methods led to disparate results from the servicers involved. For example, the review process at JPMorgan Chase found errors that merited compensation to the borrower in only .6% of cases, while Wells Fargo’s review turned up 11%. It’s possible that these numbers are indeed accurate, but it’s impossible to know for sure, as the guidelines provided to reviewers were too broad.

One of the key issues was a lack of guidance when it came to sampling of servicers’ mortgage files. According to the report, third-party consultants were allowed to determine their own standards for sampling, with some reviewing as few as 100 loans per category with others sampling as many as 370.

“Without using objective measures to assess sampling or comparing review methods across consultants, regulators’ ability to monitor progress toward achievement of foreclosure review goals was hindered,” writes the GAO in the summary of its report. “Absent a clear strategy to guide regular communications with individual borrowers and the general public, regulators face risks to transparency and public confidence similar to those experienced in the foreclosure review.”

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CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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