Congress Investigates Consultants Hired By Banks Accused of Foreclosure Abuses
Consultants Have a Conflict of Interest
Congress is investigating new allegations that banks acted improperly after widespread home foreclosures and evictions during the recession that started in 2008.
Part of the suspicion is falling on the Washington-based financial consulting firm of Promontory Financial Group.
Banks accused of credit abuse hired private consultants to help them clean up their misconduct after complaints about wrongful foreclosures and money laundering.
Now the consultants are being accused of conflicts of interest.
Some consulting firms that were paid billions of dollars were supposed to act as the regulatory watchdogs of banks that were paying them.
Instead, some congressmen said the consultants did sloppy work so they could continue getting paid by the banks. The consultants are accused of either underestimating the extent of the banks’ misbehavior or helping them to continue it in a way they could avoid getting caught, such as by laundering money.
Senator Elizabeth Warren, a Massachusetts Democrat, and Representative Elijah Cummings, a Maryland Democrat, said they want “additional information about the scope of the harms found” while reviewing bank foreclosures.
They said homeowners who could lose their homes as well as other consumers continue to be at risk from the financial abuses.
Congress was alerted to the problems last month when federal regulators ended a program to help millions of homeowners in foreclosure. Banks agreed to pay an $8.5 billion settlement that the government plans to distribute to mortgagees. Bank regulators also halted a foreclosure review operated by eight consulting firms.
Promontory Financial Group issued a statement in response to the allegations saying, “From Day 1, Promontory strove to conduct its review work as thoroughly and independently as possible. Our overarching concern at all times was to serve the best interests of borrowers.”
Promontory Financial Group was founded in 2001 by Eugene A. Ludwig, who served as U.S. comptroller of the currency under President Bill Clinton.