Rep. Elijah E. Cummings (D-Maryland) has requested to see copies of the ""engagement letters"" between 14 mortgage servicers and the private consultants they've hired to review foreclosure files for signs of processing errors.
[IMAGE]As part of ""the consent agreements"":http://dsnews.comarticles/regulators-hand-down-enforcement-actions-to-servicers-and-their-vendors-2011-04-13 announced in April to settle robo-signing allegations with federal regulators, the servicers are required to retain independent, third parties to review all residential mortgage foreclosure actions processed in 2009 and 2010.
These private consultants are selected and hired by the servicers but must be approved by regulators. They are charged with reporting back to the regulators with the results of the examinations. Federal regulators were to approve the engagement letters submitted by servicers by May 31.
[COLUMN_BREAK]Cummings is ranking member of the House Committee on Oversight and Government Reform. He's given the regulators until this Friday to provide him with copies of the engagement letters for the third-party consultants.
""After reviewing only a sampling of the banks' files, the federal regulators found systemic problems, illegal foreclosures, and inflated fees. I'm worried that this is only the tip of the iceberg,"" Cummings said.
In his letter to the heads of the Federal Reserve, Office of the Comptroller of the Currency, Office of Thrift Supervision, and FDIC, Cummings said, ""Rather than conducting these reviews yourselves… more thorough reviews by private consultants are supposed to ‘identify borrowers that have been financially harmed' and ‘provide remediation to these borrowers.'""
Cummings notes that some outside groups have criticized regulators' decision to allow banks to hire their own private consultants and set the terms of the reviews, asserting that their results will be biased and favor the banks.
""There has been a lot of concern with the idea of letting the banks hire their own private consultants to police themselves,"" said Cummings. ""The regulators say they are approving these agreements and holding banks accountable - we want to make sure.""
FDIC Chairman Sheila Bair said herself in testimony on Capitol Hill last month that her office and the other agencies have fielded concerns regarding the thoroughness and transparency of the foreclosure reviews.