The Government Accountability Office (GAO), a federal organization, issued a report looking into how an investigation into bank foreclosure errors was conducted. The GAO, according to an April 28, 2014 New York Times article, found that the Office of the Comptroller of the Currency and the Federal Reserve, which initially ordered the investigation, ended the investigation early. The reason the regulators ended the long investigation was so that the banks under investigation could pay borrowers who qualified for cash settlements their payouts earlier.

The regulators ordered that, as part of a $10 billion deal with the banks, 4.4 million people affected adversely by bank errors during the foreclosure process were to receive compensation—up to $125,000.  $6 billion of the settlement was set aside to help prevent foreclosures in the future. Foreclosure is the process by which a bank takes back a home from someone who is not paying their mortgage. The process is lengthy and leaves some people without their own home. Many people try to sell their homes before they are faced with foreclosure, even at a net loss to them.

Some banks in the report did not come close to completing their investigations. The banks spent hundreds of millions on consultants to review loan files, but some banks did not even complete 2% of the investigation. Another bank that had completed about 57% of their investigation found a 24% error rate in foreclosure procedures. It is hard to know if the other fourteen banks had a similar rate and how accurate the rates were as the investigation was ended early. Regulators were expecting an average 6.5% error rate. Errors include robo-signing, in which not all papers were reviewed, but the banks signed off on their foreclosures; charging the wrong fees; and wrongful foreclosures. Now that the regulators have ended the investigation, and it is clearly incomplete meaning that it will not be able to help everyone affected, legislators are choosing to criticize the decision.

Whether you have credit card debt, you cannot handle or a mortgage that is too large for you, you may wish to learn about and consider personal bankruptcy. Jayson Lutzky is a lawyer with over 31 years of experience practicing law in New York State. He has an office in the Bronx where he offers free in person consultations. To set up an appointment, call 718-514-6619. Visit www.MyNewYorkCityLawyer.com for more information. Se habla español.