by Brian Mahany
Joseph Smith is a powerful guy. He is the monitor of the $25 billion national mortgage settlement hammered out by 49 states, the federal government and several large lenders including our perennial “favorites”, Bank of America, Wells Fargo, Citi and Chase. As part of the settlement, several major lenders promised to clean up their act and provide $25 billion dollars for homeowners. The pact has already had its fair share of bad press as some states have already made claims to the cash… money that we think is better spent on distressed homeowners.
Obviously one man can’t monitor compliance of a banking system this large and this broken. To assist in the efforts, Smith hired 5 accounting firms, Grant Thornton, Baker Tilly Virchow Krause, BKD, McGladrey LLP and Crowe Horwath. Much is riding on these firms to insure that lenders really do improve their compliance efforts and provide meaningful relief to struggling homeowners.
We are a little nervous about the list of auditors. Just yesterday we wrote about Deloitte (one of the Big 4 accounting firms) and how they were implicated in covering up Standard Chartered Bank’s illegal banking activities with Iran. As we reported yesterday, Deloitte was brought in back in 2004 to monitor the bank. If the N.Y. banking superintendent is correct, they not only failed as monitors but may have actively participated in a $250 billion cover up.
We are glad to see BKD and Baker Tilly on the list. Both are medium size firms with good reputations. Just like the big banks, we have not been too enamored with the big accounting firms.
Two of the firms, McGladrey LLP and Crowe Horwath, we do not know. That leaves Grant Thornton. According to Wikipedia, they are the 5th largest accounting firm putting them just behind the “Big 4”. It’s not size that turns us off, its conduct.
Here in Milwaukee, the business community was rocked a couple years ago when the CFO of Koss has embezzled millions from the company’s coffers. The business was left teetering on financial ruin. Koss shareholders say that Grant Thornton, the company’s auditors, should have caught the fraud long before it threatened to ruin the business. Last month a federal appeals court in New York allowed other charges against Grant Thornton to proceed; allegations that the accounting giant deliberately ignored signs of fraud at a company they were auditing.
Obviously, Grant Thornton denies that they were negligent but the losses and fraud did take place on their watch and that causes us concern.
Homeowners have little faith in the banking system these days. Everyone knows a neighbor who is struggling with a mortgage. Unfortunately, just about everyone knows a friend or neighbor with a horror story of how they were treated by their lender and servicer. Toll free hot lines that are not answered, missing loan paperwork, inconsistent advice and information when they do get through to a live person, and HAMP loan modification applications that are denied for no reason or simply “lost in the system.”
For many homeowners, the settlement comes too late. They have already lost their homes.
This is one of the few chances that the banking system can start to improve its image and begin to clean up the mess they have created. We are skeptical of their ability to do so on their own. We hope, however, that Joseph Smith and the five newly appointed review firms will take their mission seriously and hold the industry accountable.
Time will tell.
If you have been mistreated by a lender, improperly denied a HAMP or other loan modification or have your own horror story, we would like to hear from you. Mahany & Ertl is not a foreclosure defense firm; we are a boutique law firm that sues lenders and mortgage servicers for fraud and other misconduct. We sue for monetary damages.
For more information, contact attorney Anthony Dietz at . Do not feel comfortable with email? You can contact the author at (direct). All inquiries are protected by the attorney -client privilege and kept in strict confidence. (If you want to share a story with readers, then send it as a comment to this blog).
Mahany & Ertl – Giving Homeowners A Voice. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. Services available in many jurisdictions.