Today is the last day for millions of homeowners to submit their requests to have their foreclosure cases reviewed, if they believe they were victims of illegal foreclosure practices. But does it even matter at this point?
The deadline coincides with reports that regulators and several large banks are negotiating a new multibillion-dollar settlement that would halt the foreclosure review effort that has been in the works for more than a year. Is it really a coincidence or simply proof that the independent foreclosure review process failed?
According to The New York Times, regulators are negotiating a $10 billion settlement with 14 banks. Most of the money would be used to reduce the mortgage balance of homeowners struggling to pay their mortgages, to help them stay in their homes, the paper reports. The settlement would also provide $3.75 billion to people who have lost their homes to foreclosure.
The settlement would put an end to the independent foreclosure review process, which resulted from a consent order the banks signed in April 2011. That order required the mortgage servicers to notify borrowers who faced foreclosure in 2009 and 2010 that they could have their loans reviewed and could receive compensation if the reviewer found wrongdoing in their files.
Mortgage servicers sent out request-for-review forms to more than 4 million borrowers, and for more than a year, the Office of the Comptroller of the Currency urged borrowers to reply. The deadline to request a review was extended twice because only a small percentage of homeowners had replied.
After 4.4 million letters were mailed to borrowers, less than 200,000 people requested a loan review, according to a report by the OCC released in June. "Independent consultants" identified an additional 144,000 loans to be reviewed, according to the report.
The process was expensive and turned out useless to most borrowers, which is probably why regulators are considering an easier way out of this mess.
In April, I asked the OCC if the low turnout could be attributed to the fact that many of the borrowers had already been foreclosed on and had moved out of the homes where the letters were being sent to. The OCC claimed servicers were using address-tracing methods to reach borrowers.
A few months ago, a letter arrived at my house. It was a foreclosure review offer for the former owner of my house. She lost the house to foreclosure in 2010 before I purchased it from a bank. I figured the lender or the OCC would track her real address at some point, but a few weeks ago, a second and final notice arrived. As I returned the letter, I recalled that the OCC claimed only 5.6 percent of the letters sent to borrowers were returned as undeliverable.
Since borrowers weren’t able to benefit from this failed foreclosure review effort, perhaps they’ll receive something out this potential settlement, if the deal is in fact reached.
But as usual, it’s all about the fine print. Much will depend on how the settlement is written.