The Federal Reserve’s use of consultants isn’t a delegation of regulatory authority, according to testimony from Richard Ashton, the Fed’s deputy general counsel.
“The Federal Reserve does not cede its regulatory responsibilities or judgment to those consultants,” Ashton said in testimony for a hearing tomorrow on independent consultants held by the Senate Banking Committee’s Subcommittee on Financial Institutions and Consumer Protection.
The Government Accountability Office said in a report last week that a search by regulators and consultants for U.S. foreclosure errors was hampered by poor planning. The review process was supposed to compensate borrowers, some of whom lost their homes to foreclosures that relied on poor documentation.
The review process was halted in January without providing compensation to any wronged borrowers. According to the GAO, third-party consultants hired by the servicers complained that the loan files and scope of the file review made the process “complicated and time-consuming.”
For all but three servicers, the review was replaced with a $9.3 billion settlement with banks including JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc.
Ashton said the foreclosure review process was “more expansive, time-consuming, and labor-intensive than what is typically required of consultants in Federal Reserve enforcement actions.”
“The result was significant delays in providing funds to consumers,” Ashton said in his prepared remarks, which were posted on the Fed’s website today. “Accordingly, the decision to replace the review of individual foreclosure files by the consultants with agreements to pay cash and provide other assistance to borrowers was based on the specialized and unprecedented nature of the particular reviews the consultants were required to undertake.”