OCC foreclosure reviews, a flawed process

The possibility of conflicts of interest is very high in the foreclosure review process. Lawmarkers raised questions about ties between the mortgage servicers and the “independent” consultants hire by them to review their practices.

According to Julie Williams, the Office of the Comptroller of the Currency deputy comptroller and chief counsel, the agency she represents has one purpose: to ensure proper compensation for harmed homeowners due to errors in the mortgage servicing process.

“Our goals are clear: fix what was broken, identify borrowers who were financially harmed, provide compensation for that injury and make sure this doesn’t happen again” Williams stated.

Although the agency’s goal is pretty clear, concerns aren’t regarding the goal, but the implementation process.

“If we do not remain committed to transparency, consistency and accountability, the foreclosure reviews will be toothless,” Sen. Robert Menendez said, cited by National Mortgage News.

Looking back in time what exactly was proposed to happen and how it happened, maybe we can understand the concern of the lawmakers. Federal banks regulators have ruled in April that 14 of the largest servicers in the country must complete a foreclosure review process, which includes the identification and assistance for homeowners, who suffered financially, because of robo-signing, improper foreclosures and other illegal actions.

Regulators imposed that independent consultants must review servicer’s practices between 2009 and 2010.

What we have learned till now is simply theory. In practice, servicers have chosen the “independent” consultants to review their practices, although the OCC reserved the right to exclude consultants based on its review of their past work. However, I did not see any of the OCC’s action in this area.

Furthermore, these “independent” consultants are paid by the servicers and even William said: “in some cases the consultants had previous business relationship with the servicers that hired them.” In other words, we can say goodbye to transparency and fairness.

Sen. Jeff Merkley raised another issue concerning the transparency of the process saying that the letters sent to homeowners which informed them about their rights to seek a review of their own case, somehow “forgot to mention” how the consultants are being paid or the consultant’s past tied to the servicers that hired them.

Williams’ answer was the agency screened the consultants, and took steps to ensure the consultants aren’t taking directions from the servicers. Furthermore, she added that the agency has rejected law firms, but she omitted to prove the agency’s actions.