Journalism in the Public Interest

Doubts About Independent Foreclosure Review Spread

Evidence emerges that the largest banks might be influencing the determination of who was victimized by their own practices.

(File, Justin Sullivan/Getty Images)

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.

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."

So, a bunch of ethically-challenged, anti-consumer organizations are busily covering each other’s rear ends in doubletalk while nothing gets accomplished.  Hooray for the public-private partnership, right?

You know, now that I think about it, is there any reason the OCC is involved in this in the first place?  My understanding is that they’re chartered to “ensure soundness” in the banking system and encourage new products, which they seem to interpret as rolling over consumer needs.  This doesn’t seem like their gig, either by inclination or directive.

If the process doesn’t start out with a rule that nobody on the consumer protection side can go to work for the banks either directly or in a lobbying position or accept “speaking fees” or write a “book” or accept money from them for providing any kind of good or service - then the process is broken before it ever starts anyway.

That is how Corporate America and America’s HNWIs break everything “government” these days:  No payoffs while the office holder - appointed, elected, or straight-up GS-# - holds offices, but after they leave office then the fees for services rendered while in office can hit truly staggering levels…tens of millions and more.  Jobs for the kiddies, too.

Given my growing pessimism about the potential for humankind’s growing up, it makes me dream of a future of horrible things…like those explosive collars that are featured in some science fiction novels and films:  Acknowledge crossing the line somewhere down the road by accepting the pay-off in whatever form it is delivered, and…kapow!  Instant justice. 

lolll…if such existed today, we would have already lost a lot of members of Congress and a former President or two. 

Disclaimer:  Any resemblance to any persons living, dead, or undead should be construed as a miracle.  (That for all of you readers who either think themselves to be of great historical significance or responsible for the safety of same.)

What a joke.  So, this is the road to oligarchy?  Are we there yet?
I have to wonder about Obama.  He certaintly sold himself as something he is clearly not.  A civil libertarian?  No.  An environmentalist?  No.  A consumer advocate?  No.  Someone willing to fight for the 99%?  Hell no.
Would Romney be so different?  Maybe a little worse depending on how much red meat he has to throw to his rabid lunatic base to get re-elected.  But, not significantly different.
Obama has been such a disappointment.

Jordana Lipscomb

Oct. 19, 2012, 4:26 p.m.

“Harm or no harm?” My bank servicer which treated me like an abject piece of dog poo for nearly two years is determining whether they harmed me? They hate me. I fought with them every step of the way and when I could not get results, I reported them to a higher authority. They absolutely hate me. This whole process smells like the dog poo I was rolled in.


Oct. 19, 2012, 8:44 p.m.

They not moved on any filings and won’t until after the deadline.  I filed mine in Dec 2011 and am still waiting.
This is all lip service just like HAMP and everything else the gov has done.  As Geithner put it to Barofsky, they were trying to “foam the runway” for the banks so they could stagger the foreclosures.  There was never any real intent on the government’s part to help homeowners. I should be getting the $125,000 on my case but I think the odds are like winning the lottery.  The national mortgage settlement is completely separate from this and seems to actually be offering at least something.

Funky Winkerbean

Oct. 19, 2012, 11 p.m.

If I ever lose my house, people out there who wear suits and ties and who lie all day long while stealing and counterfeiting are going to die very horrible, very painful deaths.

As a former employee that worked on this project for two of the major banks listed above I can tell you this review is not really a review. The funny thing it is the incompetence of the OCC and Federal Reserve that allows this to go on. How is this audit independent if the banks hire the consultants as contractors who can be fired at will if they disagree with bank in regards to the audit. It is bad enough that these are temporary positions with no benefits at all. If the employees speak with the media they are terminated so everyone keeps their moth shut and turn a blind eye for they sake of a paycheck. When these projects are finished truth of about the audits will come out.

Like WestCoastliberal, I filed mine on 12/2011 also, but I received a letter from the review in Sept. that my review was still in progress. That’s 10 months, but why in Oct. I received notice from BofA that they are transfereing my loan to Select Portfolio Servicing, Inc on the 1st of Oct. I have been fighting this foreclosure ever since 2006. After losing a job because of this, (forced into retirement after getting hurt during this process on my job) At the U.S. Postal Service, drawing down all of my 401k for attorneys, and I am a 20 year veteran of the U.S. Army, now I can’t even get right from the wrongs that were done against me.
Stay in your homes, fight to the end, after everything we have been through with the theives and crooks, lets stand up for ourselves if our country won’t.

Melanie Rogers

Oct. 20, 2012, 6:19 p.m.

NO MORE of the same B.S. our government has been spewing out about reviews (by any bank….joke! not happening!), compensation only for those still in foreclosure, blah blah blah B.S.!!! Financial regulators need to do their jobs and review what banks have robbed their customers and investors! Banks can not possibly review themselves because they know and we know who they have destroyed, and that’s why we employ regulators for that job!! How many times will there be useless investigations into this disaster and the same ones at that over and over!! Washington is USELESS and have done nothing but give the same story of ‘we are investigating” repeatedly!  What is it going to take? We are DONE now waiting. DO SOMETHING!!!

I gave up trusting everything…  government, organizations, companies, individuals.

When this depression broke, it was due to Clinton repealing Glass Steagal, though we did not know it at the time.  When $9 trillion of people’s mortgage value went down as a result and nobody complained, I figured then that there is nothing to believe in anymore.  People are too dumbed down to see what is gong on.  It was then that I decided to stop paying my mortgage and to let the bank have it back—AFTER I go bankrupt and after I sue them for what they have done to DESTROY MY FUTURE.

I can see now, two and a half years later, that I had made the correct decision to throw everything out and begin again.

By now I have lived in the house long enough without paying—I was able to use my time out of work to learn new skills to prepare to launch some new businesses and, God willing, they will become something for me to rebuild my life with.

The banks lost hundreds of thousands of dollars with me having sued them and me remaining in the house.

We do not need government apparently if all it does is work AGAINST the people and defend totalitarian corporations.

DONE, I am done trusting anyone…  This country is finished if people do not wake the %# up.  Do I expect them to wake up? 

NO.  never again do I borrow a penny or trust any government telling me something they do IS FOR MY OWN GOOD.

I’ll live in a tar paper writers shack and grow my own food and starve first before I borrow another dollar or TRUST the economy to not get played.

DONE.  320 million LOSERs.

Quick question for those complaining about your situation. Were you actually paying your mortgage when the bank initiatied the foreclosure?  Were you covered under scra?  Were you compliant under the terms of a loan modification (for that matter show me where in your mortgage or note you have a right to a modification)?  Were you covered under bankruptcy laws?  Do you really think the banks want to be landlord?  Foreclosure is the last option a bank wants to take.  Simple story is 99 percent of these borrowers were not paying on loans THEY agreed to pay.  This will not amount to a hill of beans.  Everyone wants a handout….

You want to know the most depressing part of this whole situation?  The person who is actually doing the ethical thing and paying off their over priced mortgage while people live in their homes for years on end for free while foreclosure are hung up in this process.

Individuals in the US need to start taking a little personal responsibility and stop blaming politicians, greed banks or the tooth fairy.  No one is out to get you contrary to what the powers that be tell you.

Ellie Kesselman

Oct. 22, 2012, 4:16 a.m.

Alan Keynes,

Let’s say you are correct about people not being compliant with the terms of their mortgage etc. I am certain that you ARE right in some cases! Also, banks do NOT want to be property owners nor landlords. That is the very last thing they want. They want people to just pay their mortgages, so the entire implicit trust arrangement will work, and everyone will be happy: People will be able to live in homes that they are paying off slowly over time, rather than requiring full cash payment. Banks make interest money in return for lending. Great.

Obviously something went wrong recently. The OCC and Federal Reserve set up this apparatus of Foreclosure Review. Resources, energy was spent on this. If it weren’t needed, the OCC and Fed should not have put it in place, as there is now a justifiable expectation that something will come of it. Nearly a year later, no funds have been disbursed to anyone. I doubt that findings were that there was not even one single instance of a deserving former homeowner.

It makes no sense to set up this foreclosure review process by regulatory authorities, then put the very same entities who did the foreclosing in charge of remediation of wrong-doing. Of course the public will be displeased, feel betrayed. There is an expectation, which the OCC and Fed “seem” (though I only know what I have read here) to be failing to uphold i.e. not be carrying through with what they started.

Peter G. Miller

Oct. 22, 2012, 7:33 a.m.

The Pro Publica examination of the alleged foreclosure review process simply confirms questions raised in July.

>>>The Independent Foreclosure Review site explains that “if your request meets the eligibility requirements, it will be reviewed by an independent consultant.”

>>>That’s great — but who is the independent consultant? Who selected this person? What are their qualifications? Does the borrower have any right to object? If the review process is “independent” then from whom is it independent? It certainly seems independent from public input.

Are Foreclosure Reviews A Hoax?

Is there any historical evidence that would lead an unbiased observer to conclude that the American financial system acted in good faith during the mortgage crisis?

Put another way, doesn’t the fact that the mortgage crisis came into being suggest that the American financial system was in full predator mode?

It is a lot easier to believe that a handful of great big investment banks decided to scam the American people and the United States of America than it is to believe that tens of millions of independent American citizens got together and colluded to scam the banks and the government of the United States of America. 

Where did those tens of millions of Americans meet?  The world’s biggest McDonald’s?  (Whose location I am frankly unaware of.)

That is what as known as - and I know you’re not supposed to use it, because it flies in the face of the argument that Wall Street/Big Banking used as they were telling Congress and the American people “Don’t worry, be happy!” while deregulation was being milked like a 24-teated cow and the housing bubble was being inflated (you remember that argument, don’t you?  “Oh, these financial instruments are just too complicated for stupid little old you to understand!”) - “common sense”.

Readers might be interested to know the Federal Reserve isn’t Federal at all but a private consortium of bankers. The largest unFed shareholders are the felons Bank of America, Citicorp, JPMorgan Chase.
Some oversight!

Disclosure Realty

Oct. 24, 2012, 5:18 p.m.

I wonder if any independent reviewer took notice that several million Wachovia loans must be destroyed because they have been funded with drug money: according to the laws cited in this U.S. Supreme Court Petition:

so for sure this consultants are hire by the banks, in this case he is not going to lookout for the borrowers he will benefit the banks since he is getting paid by them, great what a waste

This article is part of an ongoing investigation:
Foreclosure Crisis

Foreclosure Crisis: Banks and Government Fail Homeowners

Banks and the government have fallen short in helping homeowners in danger of foreclosure.

The Story So Far

Systemic failures at the country’s banks and mortgage servicers have exacerbated the most severe foreclosure crisis since the Great Depression, and government efforts to limit the damage have fallen short. ProPublica created an unrivaled database of homeowners who have faced foreclosure, opened a Facebook page to encourage homeowners to share their stories, wrote profiles of some of them, and incorporated their experiences into our reporting. We also provided a comprehensive rundown of the numbers behind the crisis.

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