California Real Estate Fraud Report

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Zombie Foreclosures Make Consultants Rich at the Expense of Homeowners

This is another sad story about the federal government  havings its strings pulled by large banking institutions with no benefit to the intended beneficiaries.

Zombie Foreclosures refer to homes which were foreclosed in 2009-2010, possibly incorrectly, and/or illegally due to banking errors. The largest banks were supposed to direct $3.3 or $3.5 billion  in compensation (stories conflict on the exact number) to 3.8 million borrowers as “compensation” to those borrowers. Yep – that’s $1,000 average compensation for possibly stealing people’s homes. But the amount turned out to be a fraction of that.

Under this program, called the Independent Foreclosure Review,”  independent consultants” were supposed to review the files of the borrowers, identify errors and award “compensation.” Instead, the “consultants,” which among others were Ernst & Young, Deloitte & Touche, PricewaterhouseCoopers and the Promontory Financial Group, were “chosen and overseen by the lenders they were reviewing” according to MSN Real Estate and were paid up to $630 per hour. In an article in the Huffington Post, employees of these consulting firms looking at Bank of America loans were quoted as saying they were “discouraged” from reporting errors. One employee said “. . . we were told under threat of losing our jobs to not report what we saw.”

In the same article published by Huffington Post, Sheila Bair, the former chairwoman of the Federal Deposit Insurance Corp., stated that the Independent Foreclosure Review “. . .was doomed from the beginning. It was designed to generate fees for consultants, not to help homeowners.”

The finger of blame for mismanaging this gigantic barrel of pork appears to be pointed at the U.S. Comptroller of the Currency Office, as well as the Federal Reserve (which is not an agency of the federal government) and Chairman Ben Bernanke.

Carolyn Maloney, a New York congresswoman who is a member of the House Financial Services Committee, has asked the federal regulators who oversee foreclosure reviews, to look into this matter.

Ironically, the byline on the Comptroller of the Currency Office‘s website is “Ensuring a Safe and Sound Banking System for all Americans”. Go figure.

If you feel that the federal government may be more a part of the problem than the solution, you are not alone. The 2012 Corruption Perceptions Index, published by Transparency International, shows the government of the United States is perceived to be more corrupt than that of 18 other countries.


© Copyright 2007-2018 Monique Bryher

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The information and notices contained on The California Real Estate Fraud Report are intended to summarize recent developments in real estate fraud, mortgage fraud, short sale fraud, REO fraud, appraisal fraud, loan modification scams, loan modification fraud and other real estate related crimes occurring in Los Angeles and California. The posts on this site are presented as general research and information and are expressly not intended, and should not be regarded, as legal advice. Much of the information on this site concerns allegations made in civil lawsuits and in criminal indictments. All persons are presumed innocent until convicted of a crime. Readers who have particular questions about real estate fraud, mortgage fraud and appraisal fraud matters or who believe they require legal counsel should seek the advice of an attorney.

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