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The Federal Reserve Board has posted a video reminding borrowers that they may be eligible for compensation if they were harmed by the foreclosure process in 2009 or 2010.
May 23 -
The Office of the Comptroller of the Currency has dismissed one of the consultants overseeing a massive foreclosure review after it discovered a conflict of interest in outside work the company has performed.
May 11 -
Comptroller of the Currency Thomas Curry on Thursday urged eligible borrowers to sign up for the OCC's foreclosure-review process, and suggested that homeowners who didn't like the results would still be able to sue their mortgage servicers later.
April 19 -
Joe Smith could choose a large consulting firm as project team leader only and mandate that this firm pick experts and on-the-ground compliance staff from a wider range of outfits.
April 16
It was pitched as good news for foreclosed-upon borrowers: Last month regulators announced an extension for those seeking reviews of servicers' actions under the April 2011 federal consent orders. Consumers now had until yearend to submit claims.
I think the big mortgage servicers, and their consultants, are in no hurry to start the reviews. They’d love it if these megabanks never have to pay borrowers a dime.
"Reviews are still underway. We hope the compensation will begin soon with a limited number of borrowers receiving compensation in the fourth quarter of 2012" says Bryan Hubbard, a spokesman for the Office of the Comptroller of the Currency. Regulators have been
Who’s getting paid in the meantime? The independent consultants.
Financial services consultant Promontory and global audit firm PricewaterhouseCoopers are the biggest winners, with seven of the 14 foreclosure review engagements between them. Deloitte is responsible for the
PwC has
It’s in consultants' best interests to extend the foreclosure review engagements as long as possible without coming up with an estimate for each servicer of its total liability to borrowers. The big banks don’t want to see that number – they would have to disclose it and few have done any preliminary disclosure of this exposure or even the costs of the reviews. The consulting firms want the megabanks as clients, now and in the future. There’s even more money available for policy, procedure and technology remediation of the problems that caused the "errors" in the first place, and those contracts are not constrained by an OCC or Federal Reserve review of conflicts.
That’s where the borrower deadline extension – and the upcoming presidential election –come in.
The "independent consultants" talk amongst themselves on weekly conference calls that do not include the regulators. The consulting firms are still talking about the "framework" for reviewing foreclosure files and estimating borrower liability. These conference calls, in my opinion, undermine the OCC and Fed goals of ensuring the consultants'independence by directly controlling their activities.
The conference calls cover the status and strategy for the foreclosure reviews at each mortgage servicer. After all the effort by regulators to ensure contracts were given only to consultants with limited conflicts of interest at each bank, these discussions could provide a competitive or strategic advantage to "independent consultants" that want to sell work to another bank later. The calls also raise conflicts, and a potential reporting burden, for audit firms like Deloitte, PwC and Ernst & Young if issues at their audit clients are discussed, especially discussions that suggest the occurrence of fraud or illegal acts.
When I asked Hubbard at the OCC to guess why I had a beef with these calls, he mentioned another worrisome possibility: Consulting firms could collude to minimize the financial impact of the reviews on banks that are clients, and potential clients, for all of them.
But Hubbard says regulators also hold weekly meetings with the consultants. "The objectives of the conversations between the consultants are to share best practices, promote consistency and respond to specific direction from the regulators. While regulators have endorsed and supported these types of conversations, regulators have also stressed the importance of not improperly disclosing confidential supervisory information, including private customer information."
Unfortunately, a firm with the most to lose from a conflict of interest or a breach of client confidentiality – an audit firm – is accused of breaching that trust in another bank regulatory case. Deloitte, now reviewing its own work at JPMorgan, is accused of abdicating its duties as a regulatory monitor at Standard Chartered Bank. The
I believe the large banks, with the help of the consultants, are trying to run out the clock on the foreclosure reviews. It’s no secret that the megabanks, and
It’s time for the big banks, and their independent consultants, to stop stalling and prepare to finally pay borrowers for foreclosure abuses.
Francine McKenna writes the blog