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Tuesday, December 4, 2012

Few Homeowners Have Requested Independent Foreclosure Reviews

Posted By on Tue, Dec 4, 2012 at 12:27 PM

Once again, a good policy tainted by poor implementation.
  • Once again, a good policy tainted by poor implementation.

By now, it's old news that many people lost or nearly lost their home because of banks' errors during the foreclosure crisis. A 2010 ProPublica analysis, for example, found that around a quarter of loan modification rejections occurred because the mortgage service provider couldn't find certain documents. Some homeowners reported that they never received modification denial letters. Others discovered that their home had been sold even while their loan modification remained pending.

So, in April 2011, the Federal Reserve ordered that a bunch of banks must retain an independent consultant to review potentially sketchy foreclosures. If a problem was found, the banks would be forced to compensate the homeowner. Anybody whose primary home was in foreclosure in 2009 or 2010 would be eligible.

The deadline to file a request is now less than a month away. In the year and a half since the program's inception, only 7 percent of eligible homeowners have filed a request. In California, that rate is 18 percent.

See Also: The Dispossessed: Bayview Homeowners Fight Foreclosures

At a press briefing last week hosted by New America Media, which reported the most recent statistics, housing advocates argued that the feds did a poor job reaching out to minority communities, which were disproportionately affected by the foreclosure crisis.

The outreach process for Independent Foreclosure Review consisted of mailers. According to the Office of the Comptroller of the Currency, which oversees the initiative with the Fed, more than 4 million letters were sent out explaining the program. Wronged homeowners could receive between $500 and $125,000 in compensation. And a few have the chance to get their house back.

Initially, the deadline was set for the end of July. By May, however, only around 4 percent of recipients had utilized the program. The deadline was extended to Sept. 30 -- and then it was moved again, this time to Dec. 31.

Housing advocates have complained for months about weak outreach efforts behind the foreclosure review initiative.

After all, many of the homeowners the officials are targeting are probably pretty hesitant to follow up on some paper they got in the mail claiming that they can get free money or a foreclosure rescinded just by filling out some documents. Many had likely been scammed before -- like Geary Brown, one of the subjects of our May feature story, "The Dispossessed":

In November 2010, he paid American Home Financing, a foreclosure assistance service, $3,500 to help get him a loan modification. The company told him to stop paying his mortgage until a representative got back to him, he says (American Home Financing did not answer several calls from SF Weekly). This was a common piece of advice: In many cases, banks only considered modification once a homeowner proved hardship. But American Home Finance never got back to him. (The Better Business Bureau has given the company an "F" rating.) Brown missed six straight payments.

Government officials seeking to help out struggling former homeowners are less persistent in their pursuit than were the predatory lenders who persuaded those homeowners to take on shady adjustable rate mortgages in the first place.

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Albert Samaha


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