Jul092012

Foreclosure reviews are a gambit few former owners signed up for

With millions of delinquent borrowers facing foreclosure, the death cries of so many desperate people was bound to have political ramifications. The unprecedented need to process tens of thousands of foreclosures spawned foreclosure mills like David Sterns law office and other who robo-signed documents. Such a process was bound to have a few errors. Although nobody who was making their payments faced foreclosure, the so-called robo-signer scandal prompted the major banks and services to negotiate a settlement agreement with the government to settle all claims and shield themselves from future litigation.

Related to this same scandal, the federal reserve also got involved:

Background

The Federal Reserve Board issued enforcement actions against four large mortgage servicers–GMAC Mortgage, HSBC Finance Corporation, SunTrust Mortgage, and EMC Mortgage Corporation–in April 2011. Under those actions, the four servicers were required to retain independent consultants to review foreclosures that were initiated, pending, or completed during 2009 or 2010. The review is intended to determine if borrowers suffered financial harm directly resulting from errors, misrepresentations, or other deficiencies that may have occurred during the foreclosure process. The servicers are required to compensate borrowers for financial injury resulting from deficiencies in their foreclosure processes.

If you had a mortgage loan on your primary residence and believe you were financially harmed during the mortgage foreclosure process by any of the four servicers in 2009 or 2010, you can request an independent review and potentially receive compensation. The four servicers are required to make the independent reviews available to borrowers as part of their compliance with the April 2011 enforcement actions. …

With something to gain and nothing to lose, many people should have signed up. That isn’t what’s happened.

A number of servicers supervised by the Office of the Comptroller of the Currency (OCC) are also required to conduct independent reviews. (See below for the full list of servicers.)

Eligibility for Review

Borrowers are eligible for an independent foreclosure review if they meet the following criteria:

  • the property securing the loan was the borrower’s primary residence;
  • the mortgage was in the foreclosure process (initiated, pending, or completed) at any time between January 1, 2009, and December 31, 2010; and
  • the mortgage was serviced by one of the following mortgage servicers:
America’s Servicing Company Countrywide National City Mortgage
Aurora Loan Services EMC Mortgage Corporation PNC Mortgage
BAC Home Loans Servicing EverBank/EverHome Mortgage Company Sovereign Bank
Bank of America Financial Freedom SunTrust Mortgage
Beneficial GMAC Mortgage U.S. Bank
Chase HFC Wachovia Mortgage
Citibank HSBC Washington Mutual (WaMu)
CitiFinancial IndyMac Mortgage Services Wells Fargo Bank, N.A.
CitiMortgage MetLife Bank Wilshire Credit Corporation

If you previously filed a complaint with these servicers about foreclosures pending during the review period, you may still seek an independent review of your foreclosure.

There are no costs associated with being included in the review; the review is a free program. Beware of anyone who wants payment to assist you in connection with the independent foreclosure review or any other foreclosure assistance program. …

Deadline to Request a Review

Requests for review by the servicers’ independent consultants must be postmarked or submitted online by September 30, 2012. Borrowers are encouraged to carefully consider the information about the review program to determine if they are eligible to participate.

The deadline has been extended twice, and they may extend it one more time, but eventually, the program will terminate.

Think about what this program is really for. This is providing closure for the banks on all past claims and insulating them from future lawsuits. Imagine a wrongful foreclosure lawsuit is filed next year. The attorneys for the banks will argue that the owner had an opportunity to file a grievance, and if they missed their chance, too bad. They would be right. This program has nothing to do with actually recovering any money for former owners. Very few claims will result in any financial compensation. I describe this as a gambit because the banks are taking a small risk today for a large advantage tomorrow. They may have to pay a few claims, but they get to avoid all claims in the future.

Few borrowers signing up for foreclosure review

Deadline for the government’s foreclosure review program has been extended to Sept. 30. Just 7.5% of the 4.5 million eligible borrowers have sought a review.

By Lew Sichelman —  July 8, 2012

Deadlines are looming for anyone seeking a review of their foreclosure proceeding and for homeowners considering a short sale.

Few taking advantage of foreclosure review

Under the terms of an enforcement action between Uncle Sam and large mortgage servicers, you still have time to ask someone to ensure that you were treated fairly if you were involved in a foreclosure.

In February, the Office of the Comptroller of the Currency and the Federal Reserve Board extended the deadline for the “independent foreclosure review” to July 31 from April 30. Now the deadline has been extended again, to Sept. 30.

The extensions provide more time to publicize the enforcement action, which requires participating servicers to retain independent consultants to identify borrowers who may have been harmed during foreclosure proceedings in 2009 or 2010. So far, the response has been disappointing.

I suspect most people simply want to move on. Requesting a foreclosure review reopens old wounds. None or those people are going to get their old houses back, and very few will see any money. Knowing this, the pain of reliving the loss is not worth it.

As of this writing, just 196,000 borrowers had actually asked for a review. The servicers have selected 142,400 more cases for review on their own, for a total of 338,400. That number is expected to grow, says Bryan Hubbard, a spokesman for the Office of the Comptroller. But as of now, that’s just 7.5% of the estimated 4.5 million borrowers covered by the enforcement action.

Only 4% of the eligible foreclosures have begun a review on their own, and about 3.5% were initiated by services. It seems unlikely that services would pick the worst cases most likely to have substantive errors, so the entire program is very unlikely to turn anything up. It’s a whitewash.

The requirements for a review are simple: A borrower is eligible if the loan was serviced by a participating lender, if the house was the principal residence and if the loan was active in the foreclosure process from Jan. 1, 2009 to Dec. 31, 2010.

Interesting that the subprime people foreclosed on in 2007 and 2008 are not eligible. They have again been deemed subhuman slime unworthy of assistance.

You don’t need to have lost your house to be eligible. You also may be covered if you paid your way out of the foreclosure process by bringing your loan current, participated in a loan modification, sold the house for less than what you owed or simply handed the keys back to your lender.

Strategic defaulters are eligible? Wow!

When this program closes, the last of the claims from the dodgy loans of the housing bubble will be put to rest. Although future actions may arise, they will be beaten down with the combined force of the Robo-signer agreement and this last-chance program. The banks should be fully insulated from now on.


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