On the Heels of the OCC’s Failed Foreclosure Review, Banks Close to $10B Settlement with Regulators

As the December 31, 2012 deadline for submission of foreclosure review claims under the OCC program has passed, more and more people are seeing the consultant-driven audit as “a ruse and a waste of time and money,” just as described by the former chairwoman of the Federal Deposit Insurance Corporation (FDIC), Sheila Bair. According to sources at the NY Times, the OCC review has already cost banks $1.5 billion, and yet aggrieved homeowners have yet to see any meaningful recovery under this review. Most are in agreement that the only ones to profit from this review have been the independent auditors hired to perform the analysis.

In light of this resounding failure, regulators are now poised to accept a cash settlement of roughly $10 billion to help compensate for abuses perpetrated against homeowners through the foreclosure process. As much as $3.75 billion of the settlement would actually go to homeowners, while the remainder would likely be taken by the regulators. The question being asked is whether this new settlement will actually help abused homeowners, or whether it will just be more window-dressing. The details of this proposed settlement are still being kept confidential until it has been finalized. If auditors are involved in the new proposed settlement, we may be facing more of the same. As Bair stated:

"I did not think consultants could be completely trusted to conduct an independent review of foreclosure files. They relied heavily on the banks for their consulting business; why would they conduct a thorough review that could end up costing the banks a lot of money to compensate past victims?"