What’s Up With “Independent Foreclosure Review”: Boondoggle for Con...

After the robo-signing scandal broke in the fall of 2010, followed by a huge bureaucratic in-fight, a federal interagency review produced the Independent Foreclosure Review Program, announced with great fanfare in April 2011. See here and, here.

The program contemplated that mortgage servicers would have to employ consultants for independent review of their foreclosure and related modification processing errors and then pay compensation to homeowners who suffered financial loss as a result, with awards of up to $125,000.  

So how’s that been going? As of now, the “independent” consultants are racking up bills for hundreds of millions of dollars (by September, a quarter billion to PricewaterhouseCoopers alone), while homeowners—according to American Banker—have so far gotten nothing!

Like every other initiative to address the mortgage crisis, this one has been marred by footdragging and control by financial institutions.  Effective outreach to borrowers has been slow, and the deadline for consumers to submit requests for review, originally set for the end of April 2012, has been extended twice—first to September 30, 2012, and later to the end of this year.

But the problem of delay pales by comparison to problems of waste and even corruption lately coming to light. The news now is that the reviews are resulting in huge compensation to consultants who are not in fact independent. The American Banker quotes “an industry source” for the proposition that the program is “Kafkaesque” in its costly ineffectiveness.  It also reports that the program is likely to result in much more payment to the review consultants than to homeowners, perhaps at a rate of $4 to $1 or maybe even $7 to $1.

PricewaterhouseCoopers apparently has been getting $12,500 per review for each of 20,000 loans for ResCap, the bankrupt GMAC servicer to be acquired by Ocwen.   The hourly rates have ranged from $235 for associates to $630 for partners!

ProPublica has delved deeply into reports that various servicers are actually heavily involved in the reviews by their supposedly independent consultants, focusing on Bank of American and its consultant, Promontory Financial Group.  Here and here.

The FAQs on the program report that payments to homeowners can start in the last quarter of this year (meaning now), but so far there is no word of any payments reaching injured borrowers; furthermore, if they are denied relief, there is no appeal process.  That would  make too much sense.