Quantcast
Connect with us

Banks found to be conducting their own foreclosure reviews

Published

on

By Paul Kiel, ProPublica

The idea behind the Independent Foreclosure Review seems simple. During the peak of the foreclosure crisis, the banks broke laws and made errors that hurt homeowners. In response, the government mandated they compensate the victims.

But there is growing evidence some banks are playing a major role in identifying the victims of their own abuses, raising the question of whether the review is compromised by conflicts of interest.

Last week we reported that Bank of America, according to bank employees and internal memos and emails, is performing much of the work itself. Now, a ProPublica examination of contracts that outline what work the banks would do on the review shows that America’s four largest banks all planned to participate heavily in evaluating whether homeowners were harmed. Three of the four banks would even help set how much compensation victimized homeowners would receive.

The four banks u2014 Wells Fargo, Citibank, JPMorgan Chase, and Bank of America u2014 together account for about three quarters of the 4.4 million homeowners eligible for the program.

ADVERTISEMENT

The review was designed to work like this: Each bank or mortgage servicer would hire an “independent consultant” to evaluate that bank’s foreclosure cases, identify who was harmed and determine how much compensation each victim deserved. The maximum cash compensation a homeowner can receive through the review is $125,000. No money has been awarded yet.

However, the secrecy of the program makes it impossible to know for sure how it’s actually being conducted. After being pushed by Congress and borrower advocates, bank regulators publicly posted the contracts between each bank and the consultant each hired last year to provide the “independent” review of foreclosure cases. It’s these contracts that show that the banks planned to perform much of the work themselves.

Yet the main regulator for the biggest banks, the Office of the Comptroller of the Currency (OCC), said the contracts don’t accurately describe how the reviews work now. “Much has changed,” OCC spokesman Bryan Hubbard told ProPublica.

ADVERTISEMENT

The OCC did confirm that some banks’ mortgage servicing divisions are coming up with “self-identified findings of harm/no harm” and presenting them to the independent consultants. But the OCC would not specify which banks are doing this.

Moreover, said Hubbard, any such finding by the banks “does not influence the consultant.”

Advocates disagree. “It’s hard to imagine that it doesn’t influence the outcome,” said Alys Cohen of the National Consumer Law Center. “The consultant is supposed to act like an arbiter between the mortgage servicer and the homeowner u2014 except the consultant is not only paid by the servicer, the servicer can put their finger on the scale. Meanwhile, the homeowner is totally in the dark once they send in their application.”

ADVERTISEMENT

What the Contracts Say

Like Bank of America, the other three big banks hired their “independent consultants” last year. Their contracts all describe a similar process for handling homeowner claims: After a homeowner submits a form detailing the bank’s ostensible errors or abuses, the bank itself would perform a review of the case to determine if the homeowner was victimized by the bank’s own practices. The bank would then pass on its findings to the consultant, which would make the final decision of how much compensation, if any, the homeowner would receive. The program launched in November of 2011, a couple of months after the contracts were signed.

Two companies u2014 Promontory Financial Group and PricewaterhouseCoopers (PwC) u2014 won half of the contracts awarded so far: Promontory is handling the reviews for three banks, PwC for four.

ADVERTISEMENT

Wells Fargo’s contract with Promontory states that the bank would “process the complaint, prepare a recommended disposition, and provide the complaint, the recommendation, and supporting documentation to Promontory for independent review and decisioning [sic].”

Promontory, which is also serving as the consultant for Bank of America’s foreclosure review, referred ProPublica back to the same comment it made in response to our previous story and declined to comment further. In response to Bank of America internal documents that indicated Promontory would be relying on Bank of America’s analysis for its determinations, a Promontory spokeswoman called the bank’s work merely “clerical” and said Promontory employees analyze the material assembled by Bank of America “independently with no involvement from the servicer.”

Wells Fargo did not directly respond to ProPublica’s questions about whether its employees were analyzing homeowners’ files. Instead, spokeswoman Vickee Adams said the bank’s role “is focused on providing relevant documents and information to the independent consultants, clarifying or confirming facts or findings and providing all details surrounding the events that occurred related to the foreclosure process.”

ADVERTISEMENT

Citibank’s contract language with its consultant, PwC, is very similar to Wells Fargo’s. “It is the responsibility of Citibank to prepare the case file and conduct the initial review of the complaint,” it states. “Citibank will then forward the in-scope complaints, a report of Citibank’s findings and its proposed resolution to PwC for independent review.”

A PwC spokesperson declined to comment. Citi spokesman Mark Rodgers said only, “We are compliant with the process we agreed to with the regulators.”

Chase’s contract with Deloitte & Touche (D&T) is a little different. It says that the consultant would do its own review of homeowner complaints, while Chase “will also conduct its own review. D&T may consider the results of [Chase’s] review in preparing its findings.”

ADVERTISEMENT

Neither Chase nor Deloitte responded directly to ProPublica’s questions about the bank’s role in the reviews. “We continue to work closely with the Independent Consultant, the regulators and the consortium [of banks involved in the program] on the final steps in the Independent Foreclosure Review process,” was the entire response from Chase spokeswoman Amy Bonitatibus.

“We are conducting an independent review of the files and it is that review alone that will drive our recommendations,” said Deloitte spokesman Jonathan Gandal. “Beyond that, we are not at liberty to discuss matters pertaining to our services.”

Smaller Banks

ADVERTISEMENT

The contracts of many smaller banks are different. The contracts of four banks u2014 Ally Financial/GMAC, MetLife Bank, U.S. Bank, and Sovereign Bank u2014 have clauses that say the banks would gather documents for the consultant’s review, but there is no mention of their employees actually analyzing the files and forwarding recommendations to the independent consultants. One bank, OneWest, had no language at all in its contract about bank employees gathering documents or reviewing files. OneWest declined to comment.

The contract between GMAC Mortgage, the fifth largest servicer, and PwC states that GMAC is “responsible for assembling the documents necessary for the review” and should see which files require “immediate action.” (The parent company for GMAC Mortgage, which declared bankruptcy earlier this year, is Ally Financial.)

GMAC spokeswoman Susan Fitzpatrick said the servicer only reviewed complaints when the homeowner had not yet been foreclosed on. The purpose of those reviews, she said, was to postpone the foreclosure sale before it occurred if it appeared that any errors had taken place. Regulators have said homeowners who submit complaints while still in foreclosure will “receive expedited attention.”

ADVERTISEMENT

GMAC is not reviewing the files of homeowners who have already lost their homes, said Fitzpatrick, and the servicer “will not propose borrower resolutions,” she said. PwC alone makes the final assessment, she said.

PwC declined to comment.

Regulators Differ

ADVERTISEMENT

The OCC is the primary regulator for most of the 14 banks conducting the foreclosure reviews, but the Federal Reserve oversees four of them. The Fed says that none of its banks are performing regular analyses of the borrower complaints.

But some of the banks overseen by the Fed do have language in their contracts saying the banks themselves would be reviewing the homeowners’ complaints. SunTrust, for instance, has language in its contract very similar to what’s in Bank of America’s. The Fed is also overseeing the review for a subsidiary of Chase, EMC Mortgage Corporation, which has the same language in its contract that Chase does for its main servicing divisions.

Federal Reserve spokeswoman Barbara Hagenbaugh said that regardless of the contracts, none of the servicers it is overseeing are forwarding analyses of the homeowner files to the consultant. “For a brief period of time early in the process, we understand one servicer forwarded a preliminary analysis of files to its consultant,” she said. “The consultant has assured us these files were not relied on for its assessments and those analyses are no longer forwarded.

ADVERTISEMENT

“Federal Reserve examiners are monitoring the consultants and servicers closely to ensure the process remains independent.”

By contrast, the OCC described a general procedure followed by the banks it oversees that includes the bank analyzing the homeowners’ files and forwarding that analysis to the consultant.

“[The] servicer generally performs its own review of how it administered the file, and will communicate its rationale and self-identified findings of harm/no harm to the independent consultant,” the OCC’s Hubbard wrote in an email to ProPublica. “The independent consultant may review the servicer’s rationale/findings, but will conduct its own review and draw its own conclusions.”



Report typos and corrections to [email protected].
READ COMMENTS - JOIN THE DISCUSSION
Continue Reading

Facebook

Disney heiress who went undercover to Disneyland ‘livid’ at conditions and pay

Published

on

Heiress Abigail Disney went to one of her family's resorts to see conditions for workers herself and was disgusted by what she saw.

In comments to Yahoo News podcast "Through Her Eyes," Disney described how she went to Disneyland in California undercover and found that workers at the resort were treated poorly—and underpaid.

"Every single one of these people I talked to were saying, 'I don't know how I can maintain this face of joy and warmth when I have to go home and forage for food in other people's garbage,'" said Disney.

Continue Reading

Facebook

Ex-Peru president wanted for corruption arrested in the US

Published

on

Former Peruvian president Alejandro Toledo was arrested in the United States Tuesday to face extradition to his home country on corruption charges, authorities in the South American nation said.

The 73-year-old is suspected of involvement in the sprawling Odebrecht scandal in which the construction giant paid hundreds of millions of dollars in bribes throughout the continent to secure huge public works contracts.

The Peruvian attorney general's office announced on Twitter that Toledo "was arrested this morning for extradition, in the United States."

Toledo has been formally charged with receiving a $20 million payment from Odebrecht to grant it the tender to build the Interoceanic Highway that links Peru with Brazil.

Continue Reading
 

Facebook

Comic-Con mines past for future hits on 50th edition

Published

on

A smorgasbord of sequels, prequels and reunions from "Terminator" to "Game of Thrones" awaits thousands of misty-eyed comic book geeks and sci-fi nerds descending on San Diego this week for the world's largest celebration of pop culture fandom.

The 50th edition of Comic-Con International will see 135,000 cosplayers, bloggers, movie executives and humble fans pile into a sweaty convention center for glimpses of their heroes, in town to promote the next mega-hit films, TV shows and comic books.

This anniversary edition promises to be more nostalgia-laden than most -- among those expected to appear are Arnold Schwarzenegger and Linda Hamilton, who will soon reunite on screen for the first time since 1991's "Terminator 2" for Paramount's killer cyborg sequel "Dark Fate."

Continue Reading
 
 
 

Copyright © 2019 Raw Story Media, Inc. PO Box 21050, Washington, D.C. 20009 | Masthead | Privacy Policy | For corrections or concerns, please email [email protected]

close-image