Foreclosure mistakes made by banks might have been significantly higher than previously believed when regulators abruptly ended a national review of their mortgage servicing operations, suggests a new report from the Government Accountability Office (GAO).
The Federal Reserve and the Office of the Comptroller of the Currency decided to terminate the independent foreclosure review last year, but most banks had not completed the examinations of their mortgage modifications and foreclosure practices. Regulators were concerned that lengthy reviews by consultants were delaying compensation getting to impacted borrowers. However, cutting short the review left regulators with limited information on the actual extent of harm to borrowers when they negotiated a $10 billion settlement as part of agreements with 15 banks, according to the report.
The GAO report suggests that agreement "was reached without adequate investigation into the harms committed by the servicers," noted Rep. Maxine Waters (D-Calif.), one of four legislators who has requested a probe into the foreclosure review by the GAO. Rep. Elijah Cummings (D-Md.), meanwhile, recently requested a hearing over the decision to end the foreclosure review.