Doubt Is Cast on Firms Hired to Help Banks

Perhaps you’ll recall a year or so back when, after years of complaints from average Americans - for example saying their bank made mistakes in calculating what they owed or wrongly put forced place instance on their home or wrongly moved forward with a foreclosure while they were making payments under a modification - who allegedly wrongly lost their homes, the OCC decided to investigate. As a result, 14 of the biggest banks and services signed a Consent Order agreeing to have their foreclosure files reviewed by “independent auditors.”

A process was set up for homeowners to apply. Letters were sent to others. The deadline for owners to respond was extended multiple times. I heard from hundreds of folks who received letters or felt they had claims. Some filed, others felt it was useless.

It was announced that billions of dollars had been spent on these “independent audits” without the outcomes hoped for. Auditors were charging as much as $250 an hour average - which I can tell you as a lawyer who has handled plenty of work for banks is high for this type and volume of work- and were taking up to 20 hours per file when the government had estimated 8. The irony here is that the initial foreclosure firms were only paid about $1000 per file by Fannie and Freddie to actually DO the foreclosures - one of the reasons I've said all along there were so many errors made. Yet under this Consent Order, auditors were paid up to 5 times that amount – as much as $5,000 - to REVIEW the actual work.

In any event a few weeks back it was decided the reviews took too long and cost too much so a settlement was reach for $8.5 billion to be paid to homeowners, but again without actually identifying which homeowners would be paid how much.

Now it is being suggested that there were problems with the auditors themselves not actually being “independent”! In the bigger pictures this shows us – once again - how there are some aspects of these problems that are just too big to try to go back and pinpoint and fix. And how naive it is to think otherwise. At least to some extent it has to cause us to wonder how much better this huge volume of original foreclosures, which hit unprepared banks all at once under difficult circumstances, could have realistically been handled. I’m not answering that question here, only asking it.

This OCC investigation, Consent Order, so-called independent audit and now $8.5 billion settlement debacle has resulted in harmful unintended consequences; it delay the foreclosure process as banks slammed on the brakes, afraid to move cases forward. It sent mixed messages to homeowners. And it wasted billions of dollars that could have been paid to homeowners that had been harmed instead of big law firms and consultants to do work that may now be thrown in the garbage can. I’m just sayin’

Shari Olefson's picture
Shari Olefson

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