Wednesday, November 09, 2011

What's all this fuss about Independent Foreclosure Reviews?

Among an outcry of citizens over bungled mortage servicing, bungled modifications and bungled foreclosures, the Obama administration last week announced a program that will extend independent mortgage reviews for homeowners who were in any stage of the foreclosure process during 2009-2010. The best coverage that I've seen on the topic comes from (Not surprising.) The review process will be undertaken by eight contractors hired by the Office of the Comptroller of the Currency and the Federal Reserve. Note that the OCC has not exactly been a consumer-friendly institution in the past. That's why much of its oversight authority is being transferred to the Consumer Financial Protection Bureau.

I am skeptical of these reviews. It can take an experienced consumer attorney a week of solid work to evaluate the most easily ascertainable flaws in a mortgage. You need to see information that comes from different sources and is stored in different places. You have to look at the consumer's documents, the mortgage broker's documents, the title company's documents, the originator's documents, the servicer's documents, the public record of mortgage transfers, and the loan securitization documents. Finally, to determine a pattern and practice, you have to cross-reference suspected violations from one loan file to another. In short, a complete review costs thousands of dollars. to do this with millions of mortgages will cost billions of dollars. I don't know how much they've budgeted for this task, but it is likely not enough.

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