U.S. regulators are barring certain law firms from assisting in eliminating foreclosure abuses, citing potential conflicts of interest, the Wall Street Journal reported.
In one case, the Federal Reserve rejected a GMAC mortgage proposal that Alabama-based attorney Bradley Cummings would assist with an independent, U.S.-mandated review of past home seizures, given that his firm had previously defended GMAC is a foreclosure-related lawsuit.
This is just the latest hurdle in a long-fought battle by U.S. bank regulators to have banks rectify shoddy foreclosure practices.
Instructions issued in April gave banking institutions, including Bank of America, Wells Fargo and Citigroup, until mid-June to draw up plans after widespread problems with bank foreclosure processing operations became public last fall. As per the instructions, the banks were required to hire independent consultants to evaluate all foreclosure proceedings from 2009 and 2010 to establish whether they improperly foreclosed on any homeowners.
Conflicts of interest could undermine the credibility of the evaluations, which are carried out by independent contractors hired by the banks, critics have said.
Documents describing which outside firms will conduct the reviews and how they will be conducted were filed with federal banking regulators last week. Once regulators sign off on plans, the firms handling the look-back assignments will then have 120 days to find errors, the Journal said. [WSJ]