Community Dividend

Regulators extend deadline for requesting an independent foreclosure review

Published April 1, 2012  |  April 2012 issue

An important deadline for borrowers who may be eligible to receive compensation for a recent mortgage foreclosure has been extended to July 31, 2012. The extension, announced by the Board of Governors of the Federal Reserve System (Board) and the Office of the Comptroller of the Currency (OCC), gives eligible borrowers whose loans were in foreclosure in 2009 or 2010 more time to request an independent, third-party review of the foreclosure processes for their loans. If deficiencies are found, the borrowers may receive compensation.

The review process was established in an April 2011 legal settlement that the Board and OCC reached with a number of companies that serviced mortgages that were in foreclosure. Mortgage servicing refers to the ongoing administrative work of collecting mortgage payments from borrowers and distributing the payments to investors who own the mortgages. Other servicing responsibilities may include sending payment and tax statements to borrowers, reporting on loan performance to investors, managing escrow accounts, and acting as the investors' agent to resolve problems with the mortgages, such as delinquencies or foreclosures.

The settlement reached by the regulators and the mortgage servicers only includes mortgages for which a foreclosure was initiated, pending, or completed between January 1, 2009, and December 31, 2010. The mortgages must have been serviced by one of the participating mortgage servicers during that time frame. (For a list of the participating servicers, see the table below.) In addition, the property securing the loan must have been the borrower's primary residence. Borrowers who meet these criteria and believe that they were financially harmed during the mortgage foreclosure process must request an independent review of their respective foreclosure as the first step toward potentially receiving compensation.

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After receiving a request from an eligible borrower, the mortgage servicers subject to this action are required to retain an independent consultant to review the foreclosure. The independent 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. Based on this review, the servicers are required to compensate borrowers for financial injury resulting from deficiencies in their foreclosure processes.

Examples of some, but not all, of the situations that may have led to financial injury are:

  • The mortgage balance amount at the time of the foreclosure action was more than actually owed;
  • The borrowers were doing everything required under a loan modification agreement, but the foreclosure sale still happened;
  • The foreclosure action occurred while the borrowers were protected by bankruptcy;
  • The borrowers requested assistance/modification, submitted complete documents on time, and were waiting for a decision when the foreclosure sale occurred;
  • Fees charged or mortgage payments were inaccurately calculated, processed, or applied; and
  • The foreclosure action occurred on a mortgage that was obtained before or during active military duty, or within nine months after the active duty ended and the military service member did not waive his/her rights under the Servicemembers Civil Relief Act.

Eligible borrowers who have already filed a complaint against any of these mortgage servicers regarding their 2009 or 2010 foreclosure may still seek an independent review of their foreclosure. The review is free to borrowers; that is, borrowers pay nothing to request a review, and eligible borrowers pay nothing to receive a review. Borrowers should be wary of anyone who requests a payment for assisting them in connection with the independent foreclosure review or any other foreclosure assistance program.

Information about the review process, including how to request an independent review, was mailed to potentially eligible borrowers in November and December 2011. Additional efforts are currently being made by mortgage servicers to reach out again to as many affected borrowers as possible. After an independent review request has been made, borrowers will be sent an acknowledgement letter from the review administrator within one week. Individuals will be notified in writing of the results of the review. Because the review process will be a thorough and complete examination of many details and documents, it could take several months to complete.

The Board and the OCC will monitor the independent foreclosure review process and the servicers' outreach efforts. To facilitate the review process, Rust Consulting was selected and hired by the servicers to serve as the central administrator of the independent foreclosure review and will notify borrowers, receive requests for a review, and respond to questions about the independent foreclosure review process.

Requests for review by the servicers' independent consultants must be received by July 31, 2012. Borrowers are encouraged to carefully consider the details of the review program to determine if they are eligible to participate. If borrowers meet the three criteria but have not received a mailing, they are urged to call 888-952-9105 weekdays from 8:00 a.m. to 10:00 p.m. (EST) and Saturdays from 8:00 a.m. to 5:00 p.m. (EST). Individuals can read more information about the review program at www.IndependentForeclosureReview.com, a web site set up by the servicers.

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