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Feds hand over foreclosure reviews to the banks

This blog has discussed the foreclosure review process a number of times. Many homeowners hoped that the review process would provide some amount of compensation in a reasonable amount of time. But the foreclosure review process seemed to be inefficient as relief has not been forthcoming.

Federal regulators apparently have given up on the foreclosure review process that was intended to help homeowners who suffered wrongs during the home mortgage foreclosure scandal. That is the process is changing--they are not giving up on reviewing foreclosures altogether.

The government set up a system that involved independent reviewers to pore through documents. The Comptroller of the Currency says that delays and costs have done little, or nothing, to help homeowners.

The regulator says that roughly $2 billion dollars was forked over to consultants by last November to conduct the foreclosure reviews. Up to that same point, no borrowers received a dime, and few reviews had been completed relative to the number of claims filed. Now the government has scuttled the independent review idea and has turned to the banks to review their own foreclosures--the same banks that authorities believe used shoddy paperwork in creating the foreclosure scandal in the first place.

The idea has caused some ruckus from housing advocates. They fear that the banks may look to new shortcuts in the review process. That could cause additional harm, especially among the neediest, according to the advocates. Regulators say that the review process will not be completely behind closed doors-regulators will be checking the work the banks do under the program.

Regulators say that they hope the first paychecks to aggrieved homeowners will go out in late March. The banks will conduct the reviews with some kind of attempt at financial triage-finding the worst errors first. The process apparently creates a priority list of harms. Military personnel who were unlawfully foreclosed upon are at the top of the list, followed by homeowners who were current on payments and suffered from foreclosure anyway reportedly take the second priority.

Regulators will then apportion money to aggrieved homeowners based upon the severity of harm suffered, rather than doling out a flat fee.

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