Yves Smith, founder of the extremely popular economics blog, Naked Capitalism, today published major new installments in her ongoing investigative report on the “foreclosure review process which was set forth in consent orders issued in April 2010.” Her report is entitled, “Bank of America Foreclosure Reviews: Whistleblowers Reveal Extensive Borrower Harm and Orchestrated Coverup.”
Here’s the opening paragraph in her executive summary:
On January 7, ten servicers entered into an $8.5 billion settlement with the Office of the Comptroller of the Currency and the Federal Reserve, terminating a foreclosure review process which was set forth in consent orders issued in April 2010. Borrowers who had had foreclosures that were pending or had completed foreclosure sales in 2009 and 2010 could request an investigation by independent reviewers, selected and paid for by the servicers but subject to approval by the OCC.
Yves conducted extensive interviews with whistleblowers who had been employed by Bank of America to help conduct the foreclosure review process, a process which most of them eventually came to believe was a sham.
OCC/Federal Reserve foreclosure reviews meant to provide compensation to abused homeowners were abruptly shut down at the beginning of January as the result of a settlement with ten major servicers. Whistleblowers from the biggest, Bank of America, provide compelling evidence that the bank and its independent consultant, Promontory Financial Group, went to considerable lengths to suppress any findings of harm to homeowners.
These whistleblowers, who reviewed over 1600 files and tested hundreds more in the attenuated start up period, saw abundant evidence of serious damage to borrowers. Their estimates vary because they performed different tests and thus focused on different records and issues. When asked to estimate the percentage of harm and serious harm they found, the lowest estimate of harm was 30% and the majority estimated harm at or over 90%. Their estimates of serious harm ranged from 10% to 80%.
We found four basic problems:
- The reviews showed that Bank of America engaged in certain types of abuses systematically.
- The review process itself lacked integrity due to Promontory delegating most of its work to Bank of America, and that work in turn depended on records that were often incomplete and unreliable. Chaotic implementation of the project itself only made a bad situation worse.
- Bank of America strove to suppress and minimize evidence of damage to borrowers.
- Promontory had multiple conflicts of interest and little to no relevant expertise.
We discuss the second major finding below.
Past whistleblower leaks from Bank of America and other reviews have pointed out how frequent changes to the review process, both from the OCC and from the independent reviewers, made the process disorderly. This confusion is likely to serve as a convenient excuse for why the costs of the reviews exploded, which was one of the two major rationales for shutting them down.
Read her complete devastating investigative report in the following installments:
- “Bank of America Foreclosure Reviews: Whistleblowers Reveal Extensive Borrower Harm and Orchestrated Coverup (Part I – Executive Summary)“
- “Bank of America Foreclosure Reviews: Whistleblowers Reveal Extensive Borrower Harm and Orchestrated Coverup (Part II)“
- “Bank of America Foreclosure Reviews: Why the Cover-Up Happened (Part IIIA)“
- “Bank of America Foreclosure Reviews: Why the Cover-Up Happened (Part IIIB)“
- “Bank of America Foreclosure Reviews: How the Cover-Up Happened (Part IV)“