The Little We Know About Foreclosure Reviews Is Troubling
The bad news: what’s been revealed isn’t pretty.
Late last month the Federal Reserve Board posted two of the four engagement letters for servicers it regulates and nine project action plans. The Fed was following the Office of the Comptroller of the Currency, which three months earlier had published 12 engagement letters.
The regulators hoped releasing these documents would increase consumer confidence in the foreclosure review process and demonstrate the agencies’ commitment to transparency and accountability. The act of disclosing might have had that effect – if the disclosures themselves weren’t so troubling.
A big part of the problem is that many of the reviews are being done by Big Four auditing firms. For example, the Fed published an engagement letter between independent consultant Deloitte and JPMorgan Chase to review EMC Mortgage, a servicer the bank inherited from Bear Stearns. Deloitte is also engaged to review JPMorgan’s OCC-regulated mortgage business, including loans it got from the takeover of the failed Washington Mutual. The conflicts of interest here are egregious – in spite of claims by the OCC and Fed that they rejected some auditor-servicer engagements because of conflicts.
Rest from American Banker here…