After the Independent Foreclosure Review was announced, I was curious about whether it was truly independent, and I called Rust Consulting who operates the phone number for the program. The Rust representative claimed to not know who selects the reviewer or who pays the reviewer. See story here. Another advocate called and spoke with another Rust representative with similar results. Rust would only indicate that the feds (the agencies that protect the industry, not the Consumer Financial Protection Bureau) approve the reviewers but it refused to acknowledge or confirm that the reviewers are in fact selected by the servicer and paid by the servicer. Story here. Well the feds admitted otherwise:
Numerous readers asked for further information, and several questioned how in good conscience could consultants hired and paid for by the servicers they are examining be considered “independent?” In so many words, they asked: “Isn’t that akin to the wolf watching the hen house?”
Joe Evers, the deputy comptroller for large banks at the OCC, said independence is “a crucial component” of the consent orders against the servicers. “We’ve gone to a great deal of effort to ensure the consultants are truly independent,” he said during a telephone press briefing.
Indeed, according to Evers, some outfits that applied to be consultants, including a few law firms and subservicers, have been disqualified because the OCC did not believe they could be autonomous.
MarketWatch story here.
Wow — the servicer selects a consultant and pays them. Refusing to allow some law firms and subservicers hardly means the reviews will be independent. Does Evers or the other fed agencies truly believe that these reviews will be independent under these circumstances? Let’s see, you are a servicer — are you going to select a consultant that is more friendly to you, that has treated you well in the past, maybe worked for you? Maybe you have an ongoing business relationship with the consultant, or maybe you know the consultant would want to continue doing business with you in the future. The power of selection alone will affect the process.
Let’s say you are a consultant — are you going to try to annoy the very large servicer who is paying you by finding lots of violations, or are you going to gloss over the violations and listen to every excuse by the servicer in hopes they continue to pay you, and give you more work in the future or a reference for more work in the future.
There is no downside for a servicer to select a consultant favorable to them, and there is no upshot for a consultant to find violations during their reviews. Hacking off a homeowner (or former homeowner) costs the consultant nothing. Hacking off a servicer will affect the consultant’s bottom line. This process is by definition biased.
The feds I suppose will say “don’t worry, will be watching.” That has worked so well in the past. This scheme is not even as independent as the arbitration system set up to ripoff consumers because of the bias of the arbitrators. (Even the Wall Street Journal has found as much, story here.)
But if you want to apply for a review anyway, either call them and get the official application mailed to you, or fill out this unofficial version here.