The independent consultants hired by bank servicers to review and assess the claims of millions of borrowers who may have been harmed in the foreclosure process will not be able to contact these borrowers directly or even talk with housing counselors, according to testimony at a Senate Banking subcommittee on Tuesday.
The consultants will be operating in a "vacuum," and without access to the actual borrowers, said Alys Cohen of the National Consumer Law Review.
Promontory Financial Group managing director Konrad Alt told subcommittee chairman Robert Menendez, D-N.J., that his foreclosure review teams must ask the servicer to contact the borrower if they need additional information about a claim.
Sen. Menendez noted that the claim forms are in narrative form and consumers are unlikely to provide all the necessary information to back up their claims. It would be "very difficult to judge their claims without additional information," he said.
Under questioning from the chairman, Alt agreed that working with housing counselors would be "valuable."
But the Office of Comptroller of the Currency has legal restrictions regarding the release of confidential supervisory information that makes it difficult to engage with housing counselors.
"I would welcome the input from housing counselors," Alt told Sen. Menendez. "But you will have to address that to OCC."
Sen. Menendez responded that he will talk with OCC, calling such restrictions "unacceptable.”
The NCLC staff attorney noted that the review team engagement letters create an attorney-client privilege between the servicers and consultants.
Cohen also claimed that servicers designed the forms that consumers use to describe how they were financially harmed during the foreclosure process. "The discussion of financial injury [in the form] is confusing and misleading," Cohen testified. It omits injury caused by servicer's delays in approving loan modifications.
"Servicer delays in processing and approving a modification cost homeowners thousands of dollars in additional interest and fees, which is then rolled into the principal balance," Cohen said.
