The Office of the Comptroller of the Currency issued a report Tuesday naming the independent auditors who they've assigned to review the files of Americans who may have been mistreated during recent foreclosure proceedings. But the announcement set off a firestorm of criticism from consumer advocates, who say they have no confidence that these audits will be independent or effective.
More than four million Americans who have lost their homes to foreclosure potentially qualify for a free, independent review of their cases under a deal federal regulators and mortgage companies brokered earlier this year. The audits are available to those who were living in their home and in some stage of foreclosure during 2009 or 2010, and had a mortgage serviced by one of 24 companies that were hired by 14 banks currently under scrutiny for deficient foreclosure practices.
But if mistakes are found, it's not clear what remedies are available.
"It may mean a check. It may mean correcting a credit report. Financial injury does not just mean losing a home. It may mean there was an erroneous fee or an uncredited payment," says Bryan Hubbard, director of public affairs operations at the OCC. According to Hubbard, remediation will be determined on a case by case basis. If the borrower lost the home, they may receive reimbursement for their lost equity, or they could be reinstated to that home if it is still owned by the bank.
Though a large-scale review of faulty foreclosures sounds like good news, many consumer advocates fear that the process will prove ineffective, in part because the banks were allowed to nominate their own auditors. The OCC then had to approve their selections.
"Regulators rejected some proposed consultants and law firms to avoid potential conflicts of interest," says Hubbard, although he and the agency declined to comment on the specific number denied.
"The independent auditors that have been selected all have longstanding relationships with the banks and are interested in protecting those banks," says Ira Rheingold, executive director of the National Association of Consumer Advocates. As an example, Rheingold points to Treliant Risk Advisors, one of the auditors. "Take a look at who's on staff over there. They have [a lawyer] who's been representing big banks forever." Treliant could not be immediately reached for comment.
The questions surrounding auditors' independence highlight the contentious nature of the federal government's review program.
"We have no confidence in this process," says Diane Thompson, staff attorney for the National Consumer Law Center. "If you look at the job descriptions that have been posted for the people doing the grunt work of reviewing these cases, it's an extremely low set of qualifications. We're only getting piecemeal disclosures. There's no transparency, no accountability. There's no reason to have any confidence."
Where consumer advocates are skeptical of the reviews, the banks remain more optimistic. "The OCC is closely overseeing this process," says Paul Leonard, vice president of government affairs for the Housing Policy Council, part of the Financial Services Roundtable, a trade association that represents financial institutions. "They put enough controls in it that it looks like it is going to be a legitimate process."