Independent Foreclosure Review -- Ally/ResCap Calls It Quits
When the rest of the banks settled with the OCC and began sending out rubber checks, Ally/ResCap decided to continue its portion of the Independent Foreclosure Review. Forbes is reporting that ResCap has now opted to settle with the OCC instead of continue the IFR any longer.
ResCap has filed a term sheet with the U.S. Bankruptcy Court for the Southern District of New York. This term sheet sets aside $230 million into an escrow account. The escrow account is to be used for cash payouts to qualifying homeowners whose foreclosure files were subject to the IFR. The distributions are to take place according to the same pay schedule used for other IFR payouts. Rust Consulting of bounced-check fame have the honor of distributing the funds. Let's hope that they put the money in the right checking account this time.
Perhaps more interesting is just how much money the IFR was costing ResCap. While we got some vague cost numbers from the initial IFR settlement debacle, ResCap's disclosures to the bankruptcy court demonstrate a billing process that has gone way over budget. When ResCap filed bankrupcty, it stated that the IFR process had cost approximately $180 million. By August of 2012, that figure had risen to $250 million. As of June 26, 2013, ResCap had estimated that the cost could balloon to somewhere between $415 to $459 million.
According to documents filed in the Chapter 11 case, ResCap has been paying Pricewaterhouse Coopers $300,000 per day to perform the review. Approximately 28,000 loan files are part of ResCap's portion of the IFR. Given that the work is not yet complete, one has to wonder how many files have been reviewed so far. What is the cost per file per day? Is this just a massive payday for PwC?
In any event, homeowners whose mortgages were serviced by GMAC/Ally/ResCap in 2009 and 2010 may want to be on the lookout for communications regarding this settlement -- ResCap is to assign borrowers to payment categories within 45 days of signing the term sheet. Checks should follow shortly thereafter -- I will also update the blog when I hear any news.