Whistleblowing “Independent Claim Reviewer” Reveals the Lie Behind the Recent $8.5 Billion Bank Foreclosure Abuses Settlement

Evidence is mounting that the banks suppressed the “independent” reviewers’ efforts to find foreclosure abuses and compensate homeowner victims.

 

The last couple blogs described this settlement announced on January 7, and how it abruptly ended the “Independent Foreclosure Review” which had been the heart of the initial settlement with the banks. The banks had agreed to hire the reviewers, pay them, coordinate their efforts, all presumably within the oversight of the Office of the Comptroller of the Currency (OCC). Then after a year and a half of spending $1.5 billion on this program of which little or nothing went to the homeowner victims of the banks’ foreclosure abuses, the banks persuaded the OCC that the reviews were not worthwhile. It’s sensible to ask what did the reviews uncover, were they conducted by sufficiently experienced personnel, were they effectively administered, was there adequate oversight by the OCC, and did the process include a role for meaningful experts such as foreclosure attorneys?

Consider two clues about this.

1. Back in October 2011 as the Independent Foreclosure Reviews beginning, Georgetown Law Professor Adam Levitin wrote a long blog he called “Robosigning 2.0: Mortgage Foreclosure File Reviewers.” In it he reviewed and criticized a bank’s temp agency’s help-wanted ad for the reviewers. His main conclusions:

  • “I have seldom seen a document that says more about the…  malarkey that the OCC and Fed are trying to pass off to cover for the banks than this job ad. I think it demolishes even the thin fiction that the OCC/Fed servicing consent orders are anything more than [fake] Potemkin villages. Instead, what we have here is nothing less than a federally-blessed Robosigning 2.0.”
  • “Bottom line here–it’s hard to take the OCC/Fed consent orders seriously when all they mean is that a marginally more skilled employee is reviewing the robosigners’ original work. And one can easily imagine [a]…  red light/green light world in which they are incentivized to review more files faster and less carefully…”
  • “But this just brings us to a pair of perhaps more serious underlying problems. Even if the banks were paying for top grade legal talent… , they can’t determine that there was no financial harm done to the borrower–they simply lack the information to do so.”

2. Regretfully, what then actually happened as the banks proceeded to hire and work with these reviewers appears to be much worse even than Prof. Levitin anticipated. One former reviewer wrote a very long comment describing in great detail how the bank where was hired to conduct these reviews actively suppressed his and other reviewers’ efforts to find foreclosure errors and abuses, and to locate and compensate homeowners. Here are samples of what he wrote:

  • “We were supposedly independent contractors, but we worked directly under bank and lenders authority and supervision. Any findings we made were quality controlled by the bank. Any findings we made came directly under the scrutiny of the bank. Any arguments over our findings, and whether they should be changed or not could and often did result in termination from the program without cause or warning and we had no recourse because we were contractors.”
  • “Other issues began to come up. Many of the tests and procedures we used to test a particular loan for harm to the borrower were State Specific in regard to the foreclosure laws of that State. As we began to delve into the files we found sometimes a dozen or more violations of the foreclosure laws with a specific file. The situation was becoming heated as Claim Reviewers (as we were called) began finding more and more issues of law, not to mention, incompetence, and immorality and poor judgment. Often times it was just a lack of communications between departments within the bank that caused the problem. None the less, there were tensions building between Claim Reviewers and bank managers as the list of harm on borrowers grew. However, the bank and the OCC did find a solution. Take the questions out of the tests we were doing that asked about issues of law. So one test that had 2200 investigative questions (there are about a dozen tests for a file review) now became about 550 questions. Issues of law were removed.”
  • “At another of our group meetings we were told that if a borrower did not specifically cite the law or statute that was violated in their complaint that we were not to address a violation of law found in the file as it was now irrelevant to the issues at hand. When the questions was asked “how is a borrower going to know if a specific law or statute was violated since they are not trained in the law” the answer was that we only address what the borrower specifically complained about. The problem was that usually a borrower only had a feeling they got shafted somehow, but did not specifically know how. The complaint form also didn’t mention to the borrower that they had to be specific about issues of law. The form only asked generic questions about what happened. Now it was very evident that we were there as window dressing and not the compassionate heroes we thought we were.”

The blog to which this former reviewer was responding contains lots more of the same from other reviewers. (The blog post is from Naked Capitalism, the highly respected and popular blog, currently the third most visited business and economics blog on the web.)

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