Few Borrowers Responding to Possible Foreclosure Review

April  4, 2012
By  Joel Cone, Staff Writer

The  invitations have gone out but few have stepped forward to reap the potential  benefits. In the past year federal regulators have sent out millions of  announcements to borrowers regarding their right to initiate a foreclosure  review, but the responses have been insignificant to say the least — a mere 3  percent.

The  right to have their cases reviewed was part of a consent order announced in  April 2011 when federal regulators came down hard on 14 major financial  institutions for their alleged foreclosure abuses, enumerating a number of  enforcement actions to help the victims, reported The  Wall Street Journal.

According  to the official report on the consent decree from the Office of the Comptroller  of the Currency, reviews will be allowed on all foreclosed homes between Jan. 1, 2009 and Dec. 31, 2010. During that period of time RealtyTrac reported  nearly 2 million bank owned homes (REOs) had gone through the foreclosure process.

The problem is that it’s a year later and no compensation has been paid by the  banks, officials have yet to agree on the amount of penalties for a range of  violations, and victims have not been keen on responding to the letters, which  Lisa Sitkin, managing attorney at Housing and Economic Rights Advocates, characterized  as looking like “some of the worst scams people are getting in their mailbox,” according to the Journal.

In  the meantime, the Journal is reporting that two of the regulators — the Federal  Reserve and the Office of the Comptroller of the Currency — can’t agree on  whether some borrowers receiving aid should be required to relinquish their  right to sue the banks.

Regulators say they are working to ensure that the review process is rigorous and effective, while banks have said they don’t expect the process to uncover significant evidence of financial harm to borrowers. But the hiccups point to  the pitfalls facing government efforts to address alleged foreclosure abuses. In February, five major lenders agreed to a $25 billion foreclosure abuse settlement with state attorneys general and federal officials.

Some people familiar with the process said the amount being spent on foreclosure reviews could far outweigh the amount provided to consumers in compensation. Three major banks are spending close to $50 million a month each on auditors, attorneys and other costs related to the review process, said one person  familiar with the banks’ efforts, the Journal reported.

Since RealtyTrac began tracking foreclosure statistics back in April 2005, almost 18.2 million foreclosure filings have been reported, 4.6 million of which were bank owned homes.

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