Credit Infocenter

Banks Trusted to Review Foreclosures for Wrongdoing?

February 14th, 2013 · No Comments · Legal Stuff

by Kristy Welsh

(Last Updated On: February 26, 2018)

When I reported last month on a new settlement reached to more quickly compensate wrongly foreclosed-upon homeowners, it wasn’t evident to me this new process that eliminates costly third-party reviewers instead puts the banks in charge of the review. In other words, as so painfully, plainly stated by The Consumerist:

Pre-recession banks turned a blind eye to problems with the mortgages they handed out, bundled, sold and securitized. When that bubble burst, these same banks put the foreclosure process on auto-pilot, allowing anyone with a pulse to sign legal documents. So who better to review all those foreclosures for errors than the institutions that didn’t care in the first place?

Specifically, the banks that issued the loans, and wrongfully foreclosed upon them, will be determining:

1) if there was a error

2) if so, how much the borrower will be compensated

Though it’s certainly frustrating that the process of compensating wrongfully foreclosed homeowners has been taking such a long time, I’m not sure how this can be viewed as a preferable alternative. To the banks, yes; of course! But to the borrowers, this seems a gross disservice and deliberate negligence on the part of the Office of the Comptroller of Currency, the government agency that has given this new review process the green light. While I have no doubt banks will deem a good number of foreclosures “wrongful,” and compensate borrowers accordingly, minus an unbiased perspective, I can’t see how this review process will do borrowers the justice they deserve.

And it’s not just the long wait for monetary compensation that is bringing wrongfully foreclosed-upon homeowners down. Many are trying to figure out how to rebuild credit considering the impact of a foreclosure on their credit score.

What a shame that the people who made this mess are being trusted to clean it up.

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