The suspiciously close relationship between the large banks accused of widespread foreclosure abuses and the consulting firms hired to review them came to light within the last two months, as federal regulators put a stop to the costly and ineffective proceedings in favor of an $8.5 billion settlement.
Now, our Miami foreclosure lawyers have learned that members of Congress have announced their intention to open a federal investigation into the practices of these “independent” consulting firms, hoping to learn more about the depth of the harm inflicted.
We already know that the settlement agreement, while sounding sizable, is actually going to result in less compensation to wronged homeowners than they would have received had the consulting firms acted with integrity. However, the federal government couldn’t escape the fact that those same homeowners would likely get little to no compensation had the reviews been allowed to continue as they were being conducted.
That’s because these companies were being paid billions of dollars by the very banks they were supposed to be checking. This, combined with the fact that these firms had little formal oversight or direction meant that in some cases, they were actually found to have enabled the banks in continuing to inflict harm.
That harm goes beyond just the foreclosure review. Some firms have been accused of working to help banks avoid scrutiny with regard to large global transfers of money belonging to drug cartels – and then instructing the financial institutions on how to fly under the radar of federal authorities. These same firms have been accused of altering their own reports to the government – leaving out the banks’ facilitation of numerous illegal transfers.
With regard to the foreclosure review, there is an understanding of the fact that the government didn’t have the resources or expertise to conduct its own reviews and forcing taxpayers to cover the costs of those reviews wouldn’t have been fair either. What’s especially troubling is that foreclosure abuses continue on unabated, with government agencies still sorely lacking in any effective ability to institute recourse or oversight.
Still, some attempts have been made. The Office of the Comptroller of the Currency penalized JPMorgan Chase in January amid problems with its implementation of controls to avoid money-laundering, it also handed down a strict list of requirements with regard to consultants. To limit the potential conflict of interest, the bank was ordered to only hire a company that can provide certain specialized experience.
Moving forward, the OCC is expected to continue requiring consultant reviews of certain problems, but officials told The New York Times that there is widespread concern with regard to quality and independence.
There are no shortage of firms clamoring for such opportunities. Those involved in the now-scrapped 14-month review process raked in more than $2 billion in fees. Meanwhile, homeowners are getting about $3.3 billion out of the whole deal.
OCC officials say the entire process was quite complex, and the agency did work to spot check the results. But it wasn’t enough to curb some of the inherent problems. With banks still employing consultants in roughly 15 percent of enforcement actions, we can expect to see a continuation of these issues.
If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Legal for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Mortgage Wars,” discussing foreclosure topics that matter to YOU.
Doubt Is Cast on Firms Hired to Help Banks, Jan. 31, 2013, By Jessica Silver-Greenberg and Ben Protess, The New York Times
More Blog Entries:
Foreclosure Settlement Deal Timing Strategically Benefits Banks, Jan. 20, 2013, Miami Foreclosure Lawyer Blog