Bank of America changes foreclosure review process

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The Independent Foreclosure Review was born in April 2009 when the Federal Reserve Board issued enforcement actions against four large mortgage servicers requiring them to retain independent consultants to review possibly tainted foreclosures.

Many other mortgage companies were eventually required to perform such reviews. These reviews are intended to determine if borrowers suffered harm from errors, misrepresentations, or other deficiencies. They are supposed to be independent. But ProPublica has raised questions about that.

In its latest report on the issue, the news service reports that Bank of America has played a heavy role in the process of determining the extent to which customers were harmed. It went so far as to provide default answers for the retained independent reviewer, Promontory Financial Group. The default answers popped up on the reviewers computer screen automatically and had to be overridden by the reviewer.

"No evidence has emerged that Bank of America pressured reviewers to accept its answers, and the bank did not supply answers for the final questions: whether the bank should pay compensation and, if so, how much. But those ultimate determinations depended on responses to the preceding questions, and for reviewers the path of least effort was to accept the bank's answers," the article notes.

In any case, the bank has changed its policies and default answers are no longer provided. In the end, this may prove to be of low regulatory significance, given that only 315,000 homeowners have applied for relief via this channel.

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