Foreclosure reviews could cost mortgage servicers $200 million
Federal reviews of past foreclosures could cost top mortgage servicers $200 million, Ally Financial (GJM) said in a financial filing Tuesday.
The Federal Reserve and the Office of the Comptroller of the Currency required independent reviews for 14 servicers as part of consent orders signed in April. Consulting firms will audit nearly 4.5 million foreclosure filings between Jan. 1, 2009, and Dec. 31, 2010.
More than one year ago, federal agencies and state prosecutors launched an investigation into evidence of forged signatures, lost paperwork, improper foreclosures and other practices.
Borrowers have until July 31 to request their file be considered.
How victims of the robo-signing scandal will be compensated through the federally mandated reviews and for how much remains a moving target, but the Ally disclosure is one of the first estimates from the banks.
"It is possible that costs could be higher, particularly if the scope of the foreclosure review is expanded," Ally said in the filing. "We expect the majority of these costs to be incurred in 2012, although it is possible that such costs could be incurred over a longer period of time."
The state attorneys general settled with the top five servicers for $25 billion over the same violations. According to the preliminary arrangement, the banks will be paying that total out over the next three years. It will com in different forms of relief and fines, including up to $2,000 for harmed borrowers separate from the consent order reviews.
New regulations such as single-point of contacts, better management of vendors and Mortgage Electronic Registration Systems requirements would cost the servicers $40 million in both 2012 and 2013, according to Ally.
However, compliance costs should shrink over time, the bank said.