The $8.5 billion settlement between regulators and major banks over faulty foreclosure practices was a debacle, critics allege.
Federal regulators were in the middle of reviewing foreclosures in an effort to find homeowners harmed by bank errors. But they scuttled the reviews after examining just a small portion of foreclosures, saying it was too expensive and time consuming.
Regulators inked a deal with banks to sweep the problem under the rug, critics charge. As a result, we never learned who was really harmed or how much they were harmed by bank foreclosure misdeeds.
Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.
In return for having the foreclosure investigation terminated, banks will pay about $3.3 billion to borrowers and spend about $5.2 billion in foreclosure prevention actions. The money is being distributed with no regard to whether a borrower was harmed.
The review process had problems from the start, according to The New York Times. Regulatory oversight was almost nonexistent, many reviewers lacked experience and borrowers were uninformed and confused about the program.
Unnamed sources told The Times that managers overseeing reviews showed bias toward the bank that hired them and test questions used to check loans were incomprehensible.
"In truth, the [Office of the Comptroller of the Currency] needed to save face after a foreclosure review process it had mandated had become an expensive fiasco," writes New York Times columnist Joe Nocera.
Homeowner advocates also blasted regulators for dropping the reviews.
Although the review process was deeply problematic, fixing it would have been preferable, argued the National Community Reinvestment Coalition (NCRC).
“In terms of the actual monetary compensation involved, this settlement will not settle the score," stated NCRC CEO John Taylor in a press release. "In fact, it is likely that we will now never fully know the extent of the damage wrought on American homeowners without a case-by-case review.
"This settlement," Taylor said, "unfortunately allows these banks and the government to wash their hands of that responsibility."
Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.
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