GAO: U.S. Foreclosure Review Could Have Generated Higher Payments; Review Could Have Delivered $1.5 Billion More to Consumers if Not Halted, Federal Watchdog Finds
WASHINGTON--A comprehensive review of major banks' foreclosure files could have delivered an additional $1.5 billion in cash to consumers if it wasn't halted last year, a federal watchdog has found.</br></br>The Government Accountability Office, in a report being released Tuesday, evaluated federal bank regulators' decision last year to cancel a prolonged review of foreclosure-processing and loan-assistance mistakes. A draft of the GAO report was reviewed by The Wall Street Journal.</br></br>The foreclosure probe has been controversial from its start three years ago. Many lawmakers said regulators should not have allowed banks to hire consulting firms who had done previous work for them. Some Democratic lawmakers also have been skeptical of regulators' decision to reach a settlement ending the review early last year, saying it was premature.</br></br>The GAO report shows that the settlement "was reached without adequate investigation into the harms committed by the servicers," Rep. Maxine Waters (D., Calif.) said in a prepared statement. "Many of the files did not contain complete data, making it impossible to know whether borrowers were disqualified from the possibility of the greatest cash payouts."</br></br>The foreclosure review could have provided up to $5.4 billion in cash to consumers, instead of the $3.9 billion ultimately agreed upon, the GAO report found.