The billion-dollar black eye for the independent foreclosure review

A letter from a prominent Washington D.C. insider and banking professional heading a consulting firm may have stirred what is the next round of debate in the ongoing dispute over the effectiveness and fairness of the $9.3 billion independent foreclosure review settlement.

It turns out Promontory Financial Group, one of several consulting firms conducting the now halted foreclosure reviews, was paid nearly a $1 billion — $927.5 million to be exact — to review foreclosure files from 2009 and 2010, according to the Wall Street Journal.

As a refresher, the independent foreclosure review settlement ended a year-and-half long probe into the servicing practices of 14 servicing shops. And this is not the first time Promontory’s role is being brought into question.

For Bank of America alone, Promontory used more than 200 file reviewers working on an assumed 10 hours per file.

The engagement letter from BofA read: “Promontory and BAC agree that the success of the Foreclosure Review will require Promontory to conduct itself with a high degree of independence.” But many other segments of the letter are blacked out, limiting the ability of the press to perform additional due diligence on the subject.

Those probes were conducted by consulting firms like Promontory until regulators came to the conclusion that too much money was being spent and very little progress was being made. A settlement was reached with most of the firms to end the foreclosure reviews.

However, the WSJ report, which says Promontory confirmed its receipt of $927 million in a letter sent to the Senate Banking Committee, is opening another can of worms. The lingering question is why was such an expensive and lengthy process inevitably shut down with very little information released on the result of the probes into foreclosure files?

Members of Congress and the Government Accountability Office have claimed they still have questions and want to know more about what the consultants found.

The new letter is just a starting point.

Promontory is only one of the consultancy firms involved in the process. A search of the company’s website shows Promontory’s CEO Eugene Ludwig previously served as Comptroller of the Currency during the Clinton administration and the firm says the CEO was the former president’s “point person on the policy response to the credit crunch of the early 1990s.”

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