Doubts About Independent Foreclosure Review Spread

25 Oct

(File, Justin Sullivan/Getty Images)

by Paul Kiel
ProPublica, Oct. 19, 2012, 9 a.m.

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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.
Our FAQ on the Foreclosure Reviews

Answers to homeowners’ questions about the Independent Foreclosure Review.
Do You Work in Mortgage Servicing or as a Foreclosure File Reviewer?

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Resources

The State of HAMP
See the performance of all the mortgage servicers.
Making Home Affordable.gov
The administration’s web site for the foreclosure prevention program. Provides an FAQ, homeowner examples, and other tools to see whether you might qualify for the program.
Foreclosure Avoidance Counselors
A list of HUD-approved housing counseling agencies nationwide.
FTC Tips for Mortgage Servicing Consumers
Tips for homeowners from the Federal Trade Commission.
Program Guidelines for Mortgage Servicers
These rules lay out how mortgage servicers are supposed to conduct the program.
Calculated Risk
A finance and economics blog that provides news and metrics on the state of the housing market.

Did Your Bank Wrongfully Seek to Foreclose on You?

We’d like to hear from current and former homeowners who wrongfully faced foreclosure in the last couple of years.
Do You Work in Mortgage Servicing or as a Foreclosure File Reviewer?

If you’ve worked for a servicer or on the Independent Foreclosure Review, contact our lead reporter.

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

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.

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 — 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.”

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

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.”

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.”

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

The contracts of many smaller banks are different. The contracts of four banks — Ally Financial/GMAC, MetLife Bank, U.S. Bank, and Sovereign Bank — 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.”

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

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.

“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.”

3 Responses to “Doubts About Independent Foreclosure Review Spread”

  1. rene October 26, 2012 at 6:20 am #

    We had one start in 2008 with countrywide after we were told we’d get no help unless we went late on our payments, then it all spiralled out of control. 3 screwed up modifications and no one on the other side listening without telling us that if we did not do the mod the trustee sales would be held. We signed what we told them were not verifiable and legal documents for the mod, they just said sign as it was fine. They cancelled the foreclosure in May of 2008. we “apparently” had one in 2010, did not ever have notice and did not find out until this last month! We had no notices or information given, mailed or posted on our home. We had an illegal second TD come in and do an illegal Trustee Sale, that happened with them 2 times and both are now rescinded. BofA was called all through and I begged for assistance with the illegal second TD holder as he never paid them out and they said he was not being offered any deal with them, so we were left in limbo. We could not do anything with someone else on title, it was a nightmare. All along BofA was conspiring to have our file transferred to SPS who now continues the illegal collection practices based on our illegal Countrywide Trust loan. The assignment for the trust has a robo signature, misspellings of company names, shows MERS as the one transferring the trust and the assignment was to have been done by September 2007 but this assignment is dated October 2010. I am continuing to be harassed and belittled for attempting to communicate that they have no standing to collect. I show the proof and have filed complaints with all agencies I know of. They say we are not in foreclosure now, but limbo is our state of affairs as SPS nor BofA have complied with the QWR as required. I sent them a bill for what they owe me, as custodian of my own records, they pretend to scratch their head questioning what I am asking for and saying my requests and accusations are vague in proof, really? If you saw the correspondences you would know NOTHING is vague about the content. Also, the one point of contact thing? What a joke! I have more contact from the office of the CEO of BofA it makes me wonder how they all fit! And SPS sent me a single point of contact, then robo calls from an office where they tell me there are over 500 people, I finally got them to stop after numerous cease and desist, but who knows when they will start again. I have asked for quiet title, all my hundreds of thousands of dollars returned and to leave me be..but, looks like I’ll have to file a lawsuit..after I take the info to the fbi..at least they are willing to look at the file for notary and signature fraud under the penalty of perjury codes!! one step at a time I guess..The Banks know all these CWide loans in trusts did not have legal assignments and yet the smoke and mirror games continue? Why don’t they just admit what they know is already testified to in court documents and release homeowners across the nation from the chains of fraud? At least a lawsuit was filed yesterday in NYork against the banks and government officials who have allowed the crimes to continue and go uncharged for! Thank you!

    • rene October 26, 2012 at 6:25 am #

      The conflict of interest with the banks handling their own reviews is a crime in itself. All they have done is another con game here at the homeowners expense. They know they are up for lawsuits, so they devise a plan to get the information as the homeowners know it, the homeowners lay their cards on the table and then the banks pull in all the chips..they can see what homeowners have no clue, what they hold as documents etc. How in the world does this keep happening? This gives them more documents for their own records as many were lost or destroyed. Fox in the hen house!! WRONG!! I SAY STOP SENDING THEM ANYTHING AND CHARGE THEM WITH CONSPIRACY because it sure appears that way on the surface..makes no sense at all! “how do you know when something lacks integrity? When there is a lack of sanity” Presence of sanity breeds integrity, without sanity there is no integrity”…

  2. barbara gibbs October 26, 2012 at 10:56 am #

    You are absolutely right, We filed our claim against Chase who filed a Notice of Sale twice and advertised our home for sale in the newspaper 6 times, while we had a bankruptcy stay, we paid lawyers to try to stop them, cost us all of our money and now Chase sent Fed Ex letters from their Administrative Office, Mark Jestor asking for permission to talk to us, we thought finally they are giving us a modification, but all they did was send us a letter denying all that happened, even though we sent the evidence that they had almost taken our house . These bank robbers should be lined up and hung they have caused us so much pain and suffering and all of our money. I am 71 years old and cannot believe what these dirty crooks have been able to get away with

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