U.S. Accountability Office reams regulators and consultants for botched foreclosure reviews

Private consultants and federal regulators are in hot water for creating red tape that delayed relief to homeowners in foreclosure, according to a new Government Accountability Office report seen by the New York Times.

Regulators from the Federal Reserve and the Office of the Comptroller of the Currency designed a flawed review of troubled loans, and private consultants then carried out this review, the report found. 

The Senate Banking Committee plans to hold a hearing next week to examine the foreclosure review and other mistakes by prominent consulting firms, sources told the Times. Regulators at the Fed and the Comptroller of the Currency’s office will likely testify at the hearing, which is scheduled for April 11, according to the people briefed on the matter but not authorized to speak publicly.

The most recent problems occurred when consultants, who were ordered by regulators to scrutinize whether homeowners had been wrongfully evicted—ran up more than $2 billion in fees despite reviewing only a small fraction of foreclosed loans. Their delays in reviewing the evictions meant that millions of homeowners have yet to receive relief.

Some New Yorkers, such as Melissa Jaime, have been battling to save their homes for a long time. Jaime has gone to court more than 21 times in the past three years in order to try and save her Queens home by reducing monthly payments, she told the Times. “To me, this all sometimes feels like a cruel game,” she said. [NYT] –Hiten Samtani