Naked Capitalism is running a series of posts describing the ugly truth behind the now-defunct Independent Foreclosure Review. Whistleblowers from within Bank of America have exposed massive harm to borrowers and an attempt to cover up the harm and other flaws in the process.
Although the official line given for halting the reviews was that they were not exposing significant amounts of harm to borrowers, five contract workers at Bank of America tell a different tale. From the executive summary of Naked Capitalism's report:
Reviewer A: 90% harmed, with 30% to 40% suffering serious harm
Reviewer B: 30% harmed, including instances of serious harm; described multiple instances of serious harm on other tests performed on his borrowers but could not readily quantify
Reviewer C: 67% harmed on his test; like B, saw multiple instances of serious harm in the borrower history not captured on his test as harm; could not readily quantify but specific examples cited during interviews alone exceed 10%
Reviewer D: 95% harmed, with 30% to 40% suffering serious harm
Reviewer E: 100% harmed, with 80% suffering serious harm
These figures represent the amount of harm that five reviewers found throughout their tenure with the Independent Foreclosure Review. As you can see, the official story is highly suspect.
The Naked Capitalism investigation has uncovered many systemic issues that caused many borrowers to lose their homes. For example, the reviewers indicated that borrowers were often stuck in perpetual loan modifications. This was largely due to the fact that Bank of America didn't have systems in place to properly track the loans and because no real effort was made to ensure that data was correct.
Reviewers also found that banks were holding borrower funds in suspense accounts for almost two years -- a reasonable amount of time is normally 15 days. These amounts were often misapplied to borrower accounts. These misapplied payments then caused more problems with loan modifications. Improper fees and charges were being rolled into the capitalized amount of a loan modification, which inflated payments and ultimately made many modifications unattractive for borrowers.
Reviewers also uncovered improper fees being applied in bankruptcy, titles that were left open for years after the house was taken, and other abuses.
You can read more in part 2 of the series. In my next post, I'll cover parts 3 and 4 of the investigation.