Controversy continues to surround the shuttered independent foreclosure review process, which the Government Accountability Office reported was doomed by a lack of consistency and transparency, HousingWire reported April 17. Federal regulators ended the reviews in January after reaching a settlement with banks for $8.5 billion.
The independent foreclosure review process was designed to identify and compensate borrowers injured by robo-signing and other foreclosure processing issues. Some affected borrowers already have received checks as a result of the controversial settlement.
Lawrance Evans, GAO director of financial markets and community investment, told lawmakers that the agency would undertake additional reviews into the process that federal regulators used to arrive at a settlement given that there is no data showing exactly how many homeowners were affected by the foreclosure scandal, HousingWire reported.
Debby Goldberg, special project director at the National Fair Housing Alliance, told HousingWire that her organization has concerns about how servicers are credited for providing “soft-dollar” foreclosure assistance, such as loan modifications, short sales and deficiency waivers. She noted that a significant $5.7 billion of total settlement amount falls into this category.
“Our greatest concern is that, unlike the national mortgage settlement, the independent foreclosure review settlement bases the amount of credit the servicer receives on the unpaid principal balance of the loan, rather than the amount of assistance provided to the borrower,” Goldberg said, HousingWire reported.
She explained that if a servicer forgave $50,000 of principal on a $500,000 loan, it would receive soft-dollar credit in the amount of $500,000. Goldberg noted that this process incentivizes servicers to only focus on higher-priced residences with larger unpaid principal balances.