Government Shuts Down $632/hr. Independent Bank Of America Federal Foreclocsure Audit Contract

Last January, dozens of independent contractors showed up for their first day of work at a large, single-story Bank of America building in Tampa to right the wrongs of a foreclosure crisis that many had witnessed firsthand. Or so they thought.

They were lawyers, paralegals and other mortgage industry veterans. Along with thousands of other contractors working at banks and auditing firms like Deloitte and PriceWaterhouseCoopers, the Tampa crew was to comb through the mortgages of people whose homes were in foreclosure at the height of that crisis, in 2009 and 2010. They were looking for lost paperwork, overcharges, botched loan modifications — evidence of the kinds of errors and misconduct widely alleged by foreclosed borrowers.

It was called the Independent Foreclosure Review, and it was one of the most ambitious and costly auditing projects in U.S. history.

It was also, some of the contractors soon came to believe, a fiasco in the making. At Bank of America, contract employees were to answer more than 2,000 questions written by Promontory Financial, the consulting firm the bank hired to audit its mortgage loan files. Those questions, the contractors said, were confusing and open to interpretation. Training was spotty and mistakes were frequent, they said. Sometimes, when they noted bank-caused mistakes, they were told by Bank of America managers not to believe their own eyes.

That last serious irregularity, which has not been previously reported, was described by three of the five contract employees who spoke to The Huffington Post. All asked that their names not be used for fear of not getting future work in the industry.

“We knew what we were looking at,” said one employee. “But we were told under threat of losing our jobs to not report what we saw.”

Last week, in a surprising move with little historical precedent, bank regulators halted the program in favor of a new $8.5 billion settlement with 10 of the 14 mortgage companies, including Bank of America. Under the new deal, every homeowner who received a foreclosure notice in 2009 or 2010 — about 4 million — will receive some share of $3.5 billion, regulators said. Those payouts begin at $250 and peak at $125,000. The remaining $5 billion would pay for loan modifications and other homeowner assistance.

The contract employees were told to go home.

In ending the reviews, the bank regulators said that they were looking out for the best interests of homeowners, and that the new deal would speed payments, with checks arriving in late March. But inside observers who shared their experience with The Huffington Post and other regulatory experts familiar with the process said that the decision to scrap the reviews was also a tacit admission that the program, which had cost billions of dollars and one year of intense work, was too broken to save. Had the reviews continued, insiders note, they would have produced results compromised by systemic mistakes and errors made along the way by the contract employees at banks and at the auditors.

“It was like a badly-made ship designed to sink,” said a Deloitte employee, who reviewed JPMorgan Chase loans.

The problem wasn’t just with the banks. The regulators, led by the Office of the Comptroller of the Currency, made a colossal mistake at the outset by not insisting on a uniform and truly independent process, critics say. Moreover, regulators didn’t seem to realize that the entire process was compromised until it was far too late to save it.

“It was doomed from the beginning,” said Sheila Bair, the former chairman of the Federal Deposit Insurance Corp. “It was designed to generate fees for consultants, not to help homeowners.”

By the time the reviews were halted, the banks had paid the consultants they hired more than $1.5 billion. PwC employees working on the review billed between $235 and $630 an hour, depending on seniority, according to the American Banker.  READMOREHERE