It’s been painfully clear for a while that these “independent foreclosure reviews” directed by the OCC were nothing more than a scam, a way to once again build hopes among foreclosure victims of restitution for the fraudulent actions of their lenders. The OCC, the lead regulator on the reviews, already biased the entire enterprise by claiming that “almost nobody” was foreclosed upon wrongly. The reviews are being carried out by firms hired by the banks they are supposed to be reviewing. Back in February, Abigail Field pointed to a whistleblower at one of the firms hired by Wells Fargo for the reviews, who basically exposed them as a sham.

“I have found errors that should be moved up through the ranks, but am told “quit digging so deep”…”put your shovel away”…Focus on the questions “in scope”… The review forms are set up so no harm could ever be found. It’s equivalent of an attorney presenting his case to a judge with just 20% of the evidence.” […]

“The foreclosed victims don’t realize if they do not provide specific dates on the intake forms… their complaints are considered “general comments” out of scope.

These are just a few examples of what the whistleblower revealed; check the link for more. The fact that the firms are hiring the equivalent of robo-signers to carry out the reviews was another signal.

Now Paul Kiel has trained his eye on Bank of America’s foreclosure review process. And it’s just what you’d expect.

…a raft of evidence — internal Bank of America memos and emails obtained by ProPublica, interviews with two bank staff members who have worked on the review, and little-noticed documents released late last year by a federal banking regulator — throw the independence of the review into serious doubt. Together, they indicate that Bank of America — the financial giant with the largest number of homeowners eligible for the program — is performing much of the work itself.

The ultimate decision as to whether and how much a homeowner will be compensated is not made by Bank of America, the evidence shows, but is based largely on work that the bank itself performs. One current employee called that crucial judgment “only a matter of double checking” the bank’s work.

Moreover, the bank gets a chance to challenge that key decision before it becomes final — an opportunity not given to homeowners.

Bank of America denied this, but the structure – the bank reviews, the “independent” reviewer double-checks – is built into the entire process. BofA hired Promontory Financial Group, the EXACT SAME GROUP hired by Wells Fargo, the subject of the whistleblower claims, as their reviewer. And the contract between BofA and Promontory spells everything out. The banks would make the analysis of the loan file, and Promontory would “review” it. Clearly this means that banks get the first opportunity to frame the reviews. And they get the last opportunity as well; they can contest the compensation finding from Promontory, which happens to be Promontory’s only contribution to the process, before the resolution.

OCC predictably took BofA’s side in this. But Pro Publica showed their document trail to Sen. Robert Menendez, who sounded piqued. “Congress was led to believe that the consultants would be analyzing homeowner foreclosures completely independently of the Wall Street banks, but these memos raise serious questions as to whether that’s true,” Menendez said. “If banks are trying to skew the results in their favor, regulators should stop that immediately.”

I doubt that will happen without more pressure. Indeed, homeowners seem to have rendered the final judgment on these sham reviews. Despite multiple extensions of the deadline to apply for a foreclosure review, homeowners have stayed away in large percentages.

David Dayen

David Dayen