Costly Consultant Work on Foreclosures Prompts Congress Scrutiny
U.S. lawmakers plan to summon regulators and outside consulting firms to explain shortcomings in a multi-billion dollar settlement over botched mortgage foreclosures, according to two people briefed on the plan.
Senator Sherrod Brown, chairman of the Senate Banking Committee’s subcommittee on financial institutions, is scheduling a hearing to examine the relationship between federal agencies and third-party firms for mid-April, according to the people, who asked not to be named because the hearing hasn’t been announced.
As part of the 2011 foreclosure settlement, banks paid firms including Promontory Financial Group LLC, Ernst & Young LLP and PricewaterhouseCoopers LLP almost $2 billion to search for errors in foreclosures and recommend compensation for cheated borrowers. Regulators required many of the largest U.S. mortgage servicers to hire independent consultants to review foreclosures -- a system that was mostly halted in January when 13 servicers agreed to pay $9.3 billion in compensation and mortgage assistance.
Spokeswomen for the firms -- Debra Cope at Promontory, Amy Call Well at Ernst & Young and Caroline Nolan at PricewaterhouseCoopers -- didn’t immediately respond to telephone messages seeking comment on the hearing.
Comptroller of the Currency Thomas Curry, whose agency regulates many of the affected mortgage servicers, has said the cost of consultants’ reviews threatened to “far exceed” the eventual payout for borrowers who had been wronged. This week, about 4.2 million borrowers were sent cards informing them they will receive payments from the January settlement.