Feds to Banks: Double-Check Your Foreclosures for Errors

In the quest to right wrongful foreclosures, government regulators are turning to the last people on Earth one might expect—the unscrupulous lenders who did the foreclosing in the first place. An attempt to distribute billions of dollars in aid by independent consultants was shut down after it was found to be rife with delays and inefficiencies—consultants charged the government $2 billion in fees for 14 months of review, despite examining only a small number of the 500,000 complaints filed. So instead the Office of the Comptroller of the Currency is tapping the banks to re-evaluate their own foreclosures for errors, reports the New York Times.

Banks are to sort improper foreclosures according to degree of error, with the seriousness of the foreclosure error determining how much aid a homeowner might get. But critics say the new process is full of conflicts of interest and many loan files are in disarray. “The whole process has been a slap in the face to homeowners and a slap on the wrist to banks,” said one homeowner advocate. On the other hand, the federal comptroller's office has asked the banks to self-regulate their foreclosure practices before. (More mortgage stories.)