“Federal regulators are facing pressure from Capitol Hill to rein in a multibillion-dollar consulting industry after the companies stumbled during their recent review of mortgage foreclosure abuses. But the efforts could be stymied, given regulators’ close ties to consultants and limited legal authority to penalize them.

“The early signs are discouraging, lawmakers say. After concerns surfaced that a consulting firm was bungling the broad review of foreclosures, regulators wrote to the firm, complaining about the conduct but did not fire the consultant, said Congressional officials with knowledge of the matter who were not authorized to speak publicly.

“The use of consultants, who are paid by the same banks they are expected to help reform, will be examined at a Senate Banking Committee hearing on Thursday. Senator Sherrod Brown, the Ohio Democrat leading the hearing, is examining whether regulators inappropriately “outsource” oversight like the foreclosure review to consultants like Deloitte & Touche and Promontory Financial Group.

“Since the foreclosure review was scuttled in January, some regulators have been exploring new ways to curb the use of consultants and correct problems that occur, according to testimony prepared for the hearing.”

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