Banks, regulators start massive review of foreclosures
Some people who lost their homes to a foreclosure system wrought with error and misconduct may now request their cases be independently reviewed and potentially may be compensated.
A large-scale review of foreclosures that occurred in 2009 and 2010 began on Tuesday with federal regulators requiring the nation’s largest mortgage servicers to start mailing letters to potential victims. Independent consultants that the banks were ordered to hire in April will conduct the assessments. More than 4 million borrowers could be eligible.
“The independent foreclosure review is a significant component of the mortgage servicers’ compliance with our enforcement actions,” said John Walsh, acting Comptroller of the Currency, who along with the Federal Reserve and Office of Thrift Supervision ordered the reviews. “These requirements help ensure that the servicers provide appropriate compensation to borrowers who suffered financial harm as a result of improper practices identified in our enforcement actions.”
The actions affect 14 large mortgage servicers that were required to correct the shortcomings and errors in their foreclosure processes. The outreach effort that began Tuesday is a first step.
Each mortgage servicer is required to mail one letter to each customer who is eligible for the review. An advertising campaign will also begin shortly to get the word out to people potentially harmed by the errors, federal officials and bank representatives said Tuesday.
A financial compensation schema for borrowers found to have been foreclosed on improperly has not been developed yet, and neither banking officials nor regulators gave an estimate for how much the actions would cost the banks.
The actions by the federal regulators come after it was revealed last year that banks employed so-called robo-signers, people who signed foreclosure documents en masse without properly reviewing them; took back their homes even though they were being reviewed for a loan modification; and made other errors in the foreclosure and servicing processes.
The enforcement orders are separate from work being done by a committee of attorneys general that also hope to reach a settlement with the nation’s largest banks over faulty foreclosure practices. Those negotiations remain ongoing, even though some states have voiced concern over the direction of the negotiations, and California has dropped out altogether.
A website for borrowers who want to learn more about the federal claims process has been created, IndependentForeclosureReview.com, as has a toll-free phone line, (888) 952-9105.
-- Alejandro Lazo
Photo: A foreclosure notice hangs in the window of a home on Sand Pine Trail in the gated Willow Walk community in Hemet. Credit: Gina Ferazzi / Los Angeles Times