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Monday, February 11, 2013

Why the Independent Foreclosure Review (RIP) Became a Sham

The Independent Foreclosure Review (RIP) Became a Sham


 In a fairly shocking development, the Independent Foreclosure Review has now been abandoned and is being "replaced" by other measures related to another mortgage and foreclosure abuse settlement. In addition to obvious flaws in the process, consultants involved in the Independent Foreclosure Review may have made as much as ONE BILLION DOLLARS, far more than was paid to wronged borrowers.


North Carolina's own Brad Miller, a United States Congressman of ten years (who just left office) and a recognized consumer advocate stated "Most of the consultants' hands are not clean. They were involved in the foreclosures in the first place, as were the law firms [working on the reviews].” He also pointed out that  the Independent Foreclosure Review program has been scrapped just before a Government Accountability Office (GAO) review was supposed to come out, a review that everyone expected to condemn the process as flawed. Before leaving office, Mr. Miller stated " [Regulators] were almost certainly about to get a very critical review from the GAO. The reviews seems to have been somewhat haphazard, and they never quite got them organized.”


Even American Banker is skeptical of what happened hereIn fact, a writer for Forbes who has been tracking this mess states "In a brilliant strategy orchestrated jointly by the banks and their consultants, the project was stopped because the OCC/Fed became uncomfortable with the billions of dollars in fees paid to the consultants by the banks with no results in sight. These industry-expert consultants used a manual process rather than utilizing automated tools to gather borrower data and review it for harm." You see, a manual process could be spun as somehow more "detail-oriented" (let's roll our sleeves up and get to work!) while also causing the process to take much, much longer (more $ in fees!) without reaching as many conclusions (banks, you don't have to pay unless we reach negative conclusions!).


Other elected officials also seem to think that something is rotten in the state of Denmark (no offense, Danes, just stealing a quote from Shakespeare's Hamlet here). Carolyn Maloney, a New York Democrat who is a member of the House Financial Services Committee, has called for an investigation by federal compliance officials, as has Representative Maxine Waters, who is only the highest ranking member of the House Financial Services Committee


In fairness, those hired to perform the Independent Foreclosure Review would have to have had some knowledge and skill relevant to the relevant issues. However, having the same companies who perform day to day consulting for these banks - their largest customers - perform the review was a mistake. It's certainly much more difficult to make findings against Bank of America, Chase, CitiBank, GMAC/Ally Financial, Wells Fargo, etc. if these are the same entities who are paying your bills and making your leaders multi-millionaires.


I wonder whether the wrongfully foreclosed upon borrowers will ever get as much money as the consultants got.