The watchdog that didn’t bark

You’d almost think this was for show and not meant to actually solve the problem, wouldn’t you?

Why has the administration’s flagship foreclosure prevention program been so ineffective in helping struggling homeowners get loan modifications and stay in their homes? One reason: The government’s supervision of the program has apparently ranged from nonexistent to weak.

Documents obtained by ProPublica – government audit reports of GMAC, the country’s fifth largest mortgage servicer – provide the first detailed look at the program’s oversight. They show that the company operated with almost no oversight for the program’s first eight months. When auditors did finally conduct a major review more than a year into the program, they found that GMAC had seriously mishandled many loan modifications – miscalculating homeowner income in more than 80 percent of audited cases, for example.

Yet GMAC suffered no penalty. GMAC itself said it hasn’t reversed a single foreclosure as a result of a government audit.

The documents also reveal that government auditors signed off on GMAC loan-modification denials that appear to violate the program’s own rules, calling into question the rigor and competence of the reviews.

Some of the auditors’ mistakes are “appalling,” said Diane Thompson of the National Consumer Law Center, an advocacy group. “It suggests the government isn’t taking the auditing process seriously.”

In a written response to ProPublica questions, a spokeswoman for the Treasury Department, which runs the program, denied there were serious flaws in its oversight system, calling it “effective and unprecedented in many ways.”

One thought on “The watchdog that didn’t bark

  1. Much talk of this with colleague at work. She and I chose to bail on underwater mortgages and immediately began healing financially. Others we both know are choosing to do the modifications. One has done the mod and is now paying her original mortgage amount plus an additional lump to catch up for the mod. Another friend of mine is starting a mod and is sure it will be okay because it’s his own bank???? My colleague and I both feel these people will lose their houses anyway, but will be loaded with debt and damaged when they do, because they didn’t bail early as she and I did. That sound you hear three states away is me grinding my teeth.

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