By: Aruna Viswanatha and Emily Stephenson | Thomson Reuters
WASHINGTON (Reuters) – A top Washington law firm is suing regulators to hand over information about how it selected consulting firms to participate in a multibillion-dollar review of banks' past foreclosures.
The reviews, mandated by regulators in 2011 after widespread foreclosure shortcuts came to light, proved slow and expensive, and earlier this year 13 banks agreed to pay $9.3 billion to end them and compensate foreclosed borrowers.
But in a lawsuit in federal court in Washington, D.C., the law firm Williams & Connolly revisited the original reviews.
It is seeking documents explaining how the Office of the Comptroller of the Currency defined "independent" in its requirements for mortgage servicers to hire "independent consultants" to conduct the reviews.
The law firm declined to identify the client on behalf of which it filed the complaint.
It is possible that a consulting firm that lost out on the review contracts is behind the suit.
An OCC spokesman declined comment.
The lawsuit adds scrutiny to the foreclosure review, which had already been criticized by lawmakers as a windfall for consultants with little benefit to wronged homeowners. Critics have also said the resulting settlement may not get relief into the right hands.
Earlier this week Democratic Senator Elizabeth Warren and Representative Elijah Cummings asked to meet officials at the OCC and the Federal Reserve about their concerns over whether the process was transparent and how the reviews were monitored.
In the new lawsuit, Williams & Connolly said it had sought through a Freedom of Information Act request to the OCC any documents or records about the independence requirements for the consultants, and any documents about OCC standards for independence within the context of the foreclosure reviews.
The OCC initially denied the law firm's request, then provided limited information on a redacted basis, the law firm said. The firm said in its filing that it went to court to obtain all of the information.
David Aufhauser, the Williams & Connolly lawyer who filed the action, and who is a former general counsel of the Treasury Department and of investment bank UBS, declined to comment on the case.
The reviews have cost the banks some $2 billion, paid out to firms that conducted the reviews including Promontory Financial Group, PricewaterhouseCoopers, Ernst & Young, and Deloitte & Touche, amounting to nearly $20,000 per loan file.
One firm, Allonhill, which was originally hired to review files for Aurora Bank FSB and Wells Fargo, was later suspended in May 2012 by the OCC over conflict-of-interest concerns. Regulators said the firm was told to stop its work because it had previously reviewed some of the same loan files for an unidentified third party.
A representative of Allonhill did not immediately respond to a request for comment about whether it was behind the lawsuit.