January ABODE: Real Estate

If you’re one of the 4 million American homeowners who had their homes foreclosed on in the last few years, you may be in for a pay day. In principle, anyway—but more about that in a minute.

The federal government recently announced that homeowners who believe they were unfairly or illegally kicked out of their homes between 2009 and 2010 can now request an independent review of how the foreclosure process was handled. The announcement is part of a broader enforcement action taken against big banks last April by the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision (OTS) and the Board of Governors of the Federal Reserve System. This all stems from the big “robo-signing” scandal, in which banks essentially played fast and loose with borrowers’ loan documents.

Specifically, when the housing market collapsed and foreclosures flooded the system, low-level bank employees with little to no knowledge of foreclosures were tasked with determining who was qualified to stay in their homes, leaving open the possibility that more than a few Americans were erroneously foreclosed on. The enforcement is aimed at 14 large mortgage servicers, including Bank of America, Chase, Citibank, GMAC Mortgage, HSBC Finance, Wachovia, Washington Mutual, and Wells Fargo.

To qualify for a review, homeowners must meet three conditions: 1. The loan was serviced by one of the aforementioned lenders (for a full list, see http://independentforeclosurereview.com/faq.aspx). 2. The mortgage loan was active in the foreclosure process between January 1, 2009, and December 31, 2010. 3. The property was a primary residence.

Examples of foreclosure situations that warrant a review include things like a higher mortgage balance at the time of foreclosure than what was actually owed, ignored requests by the homeowner for assistance/modification from the bank in question, inaccurately calculated and processed fees, and military service members who were foreclosed on while covered by the Servicemembers Civil Relief Act. (Other types of “financial injury” can be found at the link above.)

Homeowners meeting these criteria will be mailed notification letters with an enclosed Request for Review form by the end of 2011. Once the form is filled out and returned, the case is reviewed by an “independent consultant,” which can take several months.
Sounds good, right? Very above-board.

Except here’s where the government’s enforcement action gets fuzzy—these “independent consultants” are actually hired by the banks, the very institutions that caused so many homeowners’ “financial injury” in the first place, which raises the potential for serious conflict of interest and bias. The government plays merely a supervisory role (sort of like the role the SEC played when the banks destroyed the U.S. economy in 2008, but we’re not bitter at all).

Snarkiness aside, the supervisory agencies remain maddeningly vague about what payouts and restitution aggrieved homeowners can expect if the review goes in their favor. There’s scant (read no) information about compensation—how home-owners will be compensated and how long it will take. There’s also the matter of receiving the Request for Review form in the first place since it’s the lender who sends them, not the government, which suggests banks have already determined which homeowners deserve to pursue claims.

All of this sounds like another example of the federal government bowing down to big banks. Yet distressed homeowners would be wise to take action regardless. If you don’t receive a notification letter saying that you’re eligible for a review, and you believe you have a case, request one by calling 1-888-952-9105 or visit www.independentforeclosurereview.com.
Only time will tell how this enforcement action will shake out, but right now, it seems a bit like “Don’t call us, we’ll call you.”—Jessie Knadler