What’s so perplexing about the gigantic $9.3 billion foreclosure settlement is the chaotic nature of the whole operation. That seems to be confirmed by a recent report from the Government Accountability Office (GAO) on the entire foreclosure review process. Since April 2011, the Office of the Comptroller of the Currency (OCC) and the Federal Reserve had been overseeing the foreclosure review, a requirement of consent orders entered into by 14 mortgage servicers. More than 4 million borrowers were eligible for reviews. In Massachusetts, over 8,200 homeowners were issued foreclosure notices and would be eligible for funds, according to data on foreclosure petitions provided by The Warren Group, publisher of Banker & Tradesman.
In January 2013, the regulators announced agreements with 11 of the servicers that replaced the reviews with a broad payment process to compensate borrowers in a more timely manner. Reviews continue for three remaining servicers. What the GAO found in its report was that the complexity of the reviews, combined with overly broad guidance and limited monitoring for consistency impeded the ability of various agencies, including the OCC and the Federal Reserve, to identify harmed borrowers – 4 million of whom are eligible for a review.
The report points to delays in the process because the rules were changed along the way. The report also cited the fact that agencies didn’t have access to “objective monitoring measures,” which would have made it easier to find those borrowers who were harmed.
The problem is that the government has taken what should be accountability and turned it upside down. There were a lot of people asleep at the wheel during the housing crisis. Now it would seem that the very people charged with overseeing the aftershocks of the crisis may have been just as comatose. As Rep. Maxine Waters (D-Calif.) wrote in a prophetic letter to the OCC in 2011: “The only thing worse than no accountability for the banks is for regulators to create the illusion of accountability while putting no enforcement behind the efforts.”
