WASHINGTON — Federal Reserve vice chair Janet Yellen blasted the aborted independent foreclosure reviews on Thursday, condemning the expenses of a process that the central bank helped set up.
"The money that we agreed on was being eaten up by very costly reviews and spending money for the consultants," she said during a question-and-answer session Thursday afternoon. "That turned out not to be a workable approach."
Yellen also said that, in hindsight, the Fed would "absolutely" have picked another process to remedy some of the biggest mortgage servicers’ foreclosure processes.
Her comments came hours after a draft report from the Government Accountability Office criticized the reviews as disorganized, ineffective and inconsistent. The Fed worked with the Office of the Comptroller of the Currency to set up the process, but the regulators in January scrapped it in favor of a $9.3 billion settlement with most of the mortgage servicers involved.
The reviews involved independent consultants, whose time wound up costing the banks more than the actual relief that the servicers provided to homeowners under the process. Now a Senate Banking subcommittee is preparing to examine the role of independent consultants in the financial services industry, including Promontory Financial Group, at a hearing next week.
"Once we were in the midst of it, it became clear that the review was serving actually to delay getting meaningful help to borrowers. This is obviously a development we were not happy with," Yellen said Thursday.
She was addressing a journalism conference hosted by the Society of American Business Writers and Editors at George Washington University.