Homeowners who believe they were financially harmed by improper foreclosure procedures now have a new avenue for relief. Three major federal regulators, The Federal Reserve Board and the Offices of Thrift Supervision and Comptroller of the Currency announced this morning that servicers under their supervision will be required to provide compensation to borrowers if their foreclosure processes caused financial injury.
As part of their compliance with enforcement actions issued by the three regulators April, a total of fourteen large servicers have been required to retain independent consultants approved by the regulators to conduct reviews when requested by eligible borrowers who were in foreclosure during 2009 or 2010, whether or not the foreclosure was completed. The consultants are charged with evaluating whether borrowers suffered financial injury through errors, misrepresentations, or other deficiencies in foreclosure practices and determining appropriate financial remediation for those customers.
The fourteen servicers (and their affiliates), all of whom have begun mailing letters to eligible borrowers that explain how to request a case review, are:
- America's Servicing Co.
- Aurora Loan Services
- Bank of America
- Beneficial
- Chase
- Citibank
- CitiFinancial
- CitiMortgage
- Countrywide
- EMC
- EverBank/EverHome Mortgage Company
- GMAC Mortgage
- HFC
- HSBC
- IndyMac Mortgage Services
- MetLife Bank
- National City Mortgage
- PNC Mortgage
- Sovereign Bank
- SunTrust Mortgage
- U.S. Bank
- Wachovia Mortgage
- Washington Mutual (WaMu)
- Wells Fargo Bank, N.A.
Requests for review must be received by April 30, 2012. Regulators are encouraging borrowers to carefully consider the information about the review program to determine if they should participate. There are no costs associated with being included in the review nor do borrowers need an attorney.
In addition to this outreach and claims program, the independent consultants will also review a variety of sample cases from each servicer. Where they identify issues, they will conduct additional secondary reviews to identify as many affected borrowers as possible. The Federal Reserve announcement said that certain categories of foreclosure actions would receive special attention including members of the military who were covered by the Servicemembers Civil Relief Act and borrowers who had previously filed complaints with the services for foreclosure actions pending during the 2009-10 period.
The Federal Reserve said further than it believes monetary sanctions against servicers are appropriate and plans to announce penalties in addition to any compensation provided to borrowers following the reviews.
Some examples of situations that might prompt a request for review were provided in the materials released to the press and public.
- The mortgage balance amount at the time of the foreclosure action was more than the borrower actually owed.
- The borrower was doing everything the modification agreement required or was properly pursuing a modification but the foreclosure sale still happened.
- The foreclosure action occurred while the borrower was protected by bankruptcy.
- Fees charged or mortgage payments were inaccurately calculated, processed, or applied.
- The foreclosure action occurred on a mortgage that was obtained before active duty military service began and while on active duty, or within 9 months after the active duty ended.
"The independent foreclosure review is a significant component of the mortgage servicers' compliance with our enforcement actions," said acting Comptroller of the Currency John Walsh. "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."
Walsh said the reviews will take several months to complete, considering the large pool of borrowers that could be part of the review.
The enforcement actions issued by the regulators in April also require the servicers to correct other deficiencies in residential mortgage loan servicing and foreclosure practices going forward, including specifying a single point of contact for certain borrowers who are having difficulty paying their mortgages, ensuring that foreclosures are not pursued when a borrower is performing on a loan modification, and establishing robust controls and oversight over their third-party vendors.
Information on filing a review request is available at www.IndependentForeclosureReview.com.
