In abruptly ending a case-by-case review of hundreds of thousands of foreclosed home loans early this year, federal regulators said the process had become simply too costly to be worthwhile. But an audit of the program by an independent government agency suggests another likely reason for abandoning the program: the reviews were simply too flawed to be reliable.
The draft report by the Government Accounting Office, an independent arm of Congress, obtained Wednesday by The Huffington Post, describes “ambiguous” guidance by bank regulators to the consultants reviewing the loans. It also cites a failure of “key oversight mechanisms” installed by regulators, led by the Office of the Comptroller of the Currency. As a result, the report concludes, “regulators risked not achieving the intended goals of identifying as many harmed borrowers as possible.”
Even if the reviews had continued to conclusion, there is no guarantee that wronged homeowners would have received any compensation, the report says.
“The report confirms that the Independent Foreclosure Review process was poorly designed and executed,” Rep. Maxine Waters (D-Calif.) said in a statement Wednesday evening. The “report confirms what I had long suspected -– that the OCC’s oversight of the supposedly independent consultants hired by the servicers was severely deficient. The report should serve as a wake-up call.”
Waters is one of a handful of legislators, including Sen. Elizabeth Warren (D-Mass.),who has called on the OCC and the Federal Reserve to disclose more details about the reviews.
Warren and another legislator, Rep. Elijah Cummings (D-Maryland), sent those regulators a letter with questions about how the process had broken down. The regulators have not answered those questions, a Cummings spokeswoman said Wednesday.