Feds Search For Help From Banksters To Carry Out Foreclosure Fraud Agreement An Implicit Acknowledgement Regulators Had Their Bones Picked Clean By Financial Industry In Settlement Negotiations

The New York Times reports:

• Washington is seeking help from an unlikely group in its effort to distribute billions of dollars to struggling homeowners in foreclosure: the same banks accused of abusing homeowners with shoddy foreclosure practices.
  
  In doing so, the regulators are trying to speed the process after a flawed, independent foreclosure review delayed relief for millions of borrowers, according to people briefed on the matter. But housing advocates worry that the banks, eager to end the costly process, could take shortcuts as they comb through loan files for potential errors, in some cases diverting aid from the neediest homeowners.
  
  Regulators say they will check the work. And banks have already agreed to pay a fixed amount to troubled homeowners, creating another backstop.
  
  According to officials involved in the process, who spoke anonymously because the matter is not public, the regulators had few alternatives.
  
  Last month, the Office of the Comptroller of the Currency scuttled the foreclosure review by independent consultants because it was marred by delays and inefficiency. Instead, the regulator struck a multibillion-dollar settlement directly with the nation's largest banks, a deal that includes $3.6 billion in payments to aggrieved homeowners.
  
  To accelerate the payments, the comptroller's office decided to cut out the middlemen, the consultants, from the reviews. In a conference call last week, the government outlined a plan to use the lenders instead, according to people with direct knowledge of the discussion. Banks will now have to assess each loan for potential errors, which will help determine the size of the payments to homeowners.
  
  The decision to tap the banks for support is the latest twist in the review of more than four million foreclosures, a process that has incensed lawmakers and ensnared the nation's largest lenders. Regulators are eager to make the payments to homeowners, who have languished for more than a year.

***

• By relying on the banks, regulators can part ways with the consultants.
  
  Despite billing for roughly $2 billion in fees in the 14-month review, consultants examined only a sliver of the 500,000 complaints filed by homeowners, people involved in the matter said. Their efforts were stymied, in part, because regulators urged consultants to first scrutinize a random sample of the four million foreclosures before digging into specific homeowner complaints, the people involved said. The decision, the people said, may have undercut the scope of the settlement and potentially deprived homeowners of additional relief.
  
  Consultants were also criticized for a faulty review process.
  
  Some consulting firms, including the Promontory Financial Group, farmed out much of the work to contract employees. Others faced questions about their objectivity. The consultants, critics note, were paid billions of dollars by the same banks they were expected to police.
  
  Some consultants say they sounded repeated alarms about the process. Last spring, a group of consulting firm executives met with comptroller officials in Washington to voice concerns that the reviews were too narrow, according to people with direct knowledge of the meetings.
  
  Other people close to the review say consultants were only partly to blame for the problem. The review process, with its narrow focus, was created by the comptroller's office in 2011, under previous leadership.

For the story, see Big Banks Are Told to Review Their Own Foreclosures.