A prominent Washington law firm is suing to get bank regulators to reveal more details behind the failed Independent Foreclosure Review, which after about 18 months and $2 billion spent was mostly scuttled recently in favor of a $9.3 billion settlement.
In its FOIA (Freedom of Information Act) lawsuit filed on March 27, Williams & Connolly wants the Office of the Comptroller of the Currency to provide more details as to the hiring of the independent consultants by some of the biggest U.S. banks in the failed review process.
The suit was brought by partner David Aufhauser in U.S. District Court for the District of Columbia on behalf of an unnamed client. Aufhauser previously served as general counsel of the Treasury Department.
The suit seeks “All documents and/or records relating to the OCC’s definition of independence,” including “Any documents and/or records relating to determining whether any particular independent consultant … was or was not independent.”
Companies including Promontory Financial Group, PricewaterhouseCoopers, Ernst & Young and Deloitte & Touche were hired by mortgage servicers to conduct the reviews.
Williams & Connolly has gained national prominence over many decades. The firm represented Oliver North before Congress and at trial over his involvement in the Iran-Contra scandal. It also successfully represented President Bill Clinton in the first impeachment trial of a sitting president in more than a century.
The OCC initially refused Williams & Connolly’s FOIA request in full, claiming that the law exempts certain reports prepared by supervisory agencies of financial institutions. Williams & Connolly appealed the request to the OCC in September.
The OCC in December released five pages of partially-redacted documents related to its definition of independence and provided documents that were publically available on its website. The regulator offered new grounds for withholding information, citing an FOIA subsection which exempts “inter-agency or intra-agency memorandums or letters which would not be available by law to a party other than an agency in litigation with the agency.”
Bank regulators initiated the Independent Foreclosure Review in 2011 after finding deficiencies, errors and potentially wrongful evictions with foreclosures filed in 2009 and 2010 by the nation’s largest mortgage servicers.
In January, the OCC and the Federal Reserve scrapped the reviews for most mortgage servicers, opting to provide about $3.6 billion in compensation to about 4.2 million wronged foreclosure victims. Postcards were mailed out March 18 to eligible borrowers, mostly stating that they would receive payments or more information in four to eight weeks.
An OCC spokesman told eCreditDaily that payments are expected to begin in April. The range is from several hundred dollars to $125,000 for the most serious offense of wrongful foreclosures leading to evictions and other hardships. Regulators have not released a framework for payment amounts.
Lawmakers and consumer advocates have criticized regulators over the handling of the foreclosure reviews and are also seeking more information. There is growing anger and frustration among homeowners that they payouts will not match the wrongdoing. Moreover, the degree of such actions may never be known now that the reviews are no longer in effect for most servicers.
Fed Chairman Ben Bernanke conceded in congressional testimony last month that the failed reviews should have been ended sooner because they were costing too much and producing few results.
“They (the consultants) had not made all that much progress, frankly, and at a very expensive cost per file evaluated,” Bernanke testified. “We were on a track where the money going to the consultants would be some multiple of the money that was suppose to go to the borrowers, and we take responsibility for this…”
In a speech in February, Comptroller of the Currency Thomas J. Curry: “So in late 2012, at the same time we were raising awareness of the Independent Foreclosure Review, we also came to the realization that maintaining our course would significantly delay compensation without appreciable benefit to the affected borrowers. I decided we needed to change direction, and the Federal Reserve came to the same conclusion.”
Curry also said that it was a difficult decision to change course: “I knew that the servicers, independent consultants, community groups, and even some members of Congress had made a personal and concerted effort to support the process and make it work as well as possible.”