From Naked Capitalism comes this sordid tale of GMAC’s expenditures on ineffectual “fraud examination” conducted by the banks on themselves, in essence:
Every time it appears that the OCC foreclosure reviews have hit bottom they sink further into the morass. Our latest example comes from a petition GMAC/ResCap filed as part of their bankruptcy. This example shows how banks are spending simply staggering, implausible amounts of money on foreclosure “reviews”, and how keen they are to enrich anyone other than wronged borrowers. Given that some of these foreclosure reviewers are also in the business of “scrubbing” loan files and creating (as in fabricating) allonges, you have to wonder whether the amount of money being spent is not on review but also “remediation” and is being bundled in with the review costs. Think of the twofer: you get to call your chicanery something else, and blame the cost on the banks’ favorite scapegoat, those big meanie regulators.
This information comes from a petition GMAC/ResCap filed as part of their bankruptcy and exposes the multiple and pricey roles being played by PriceWaterhouseCoopers (hat tip friend, colleague, and foreclosure defense super lawyer Matt Weidner).
As has already been noted in a multi-part investigative series by Jeff Horwitz and Kate Berry of American Banker these reviews are expensive; so expensive they are projected to pay $4 to reviewers for every $1 paid to homeowners. GMAC alone projects they may spend $250 million on reviews by PriceWaterhouseCoopers (PWC). In the 90 days beginning January 12, 2012, GMAC spent $51,658,206. They do not disclose the number of loan reviews this covered though, in a different petition, they clarify they used sampling to review 5,000 loans and 12,000 “borrower outreach complaint samples.” Giving them the benefit of the doubt, that every loan was reviewed during the 90-days, that comes to an obscene $10,331.64/loan. In contrast, Fannie and Freddie pay $1,250 in legal fees for an entire judicial foreclosure, beginning to end.
Several fee schedules are included, with varying roles and amounts, though it’s clear that everybody is well paid. Associates bill $235/hr., Senior Associates bill $300/hr., Managers bill $370/hr., Senior Managers bill $470/hr., Managing Directors are paid $610/hr., and Partners bill at $630/hr. To compare and contrast salary.com reports the 90th percentile pay for Family Practice Physician’s is $225,931, which comes to $868.97/day. So it’s less expensive to have a doctor spend a whole day figuring out what ails a person than it is to have a PwC partner spend 90 minutes reviewing what’s wrong with foreclosure files.
Read more at http://www.nakedcapitalism.com/2012/11/michael-olenick-schadenfreude-alert-banks-paying-extortionate-fees-for-foreclosure-reviews.html#HaxeDWiO8YM124DX.99