Nearly 4.5 million current and former U.S. homeowners will soon get a chance to have their foreclosure cases reviewed for mistakes and potential restitution.
Next month, the U.S. government expects the first wave of homeowners to receive its letters in the mail, informing them of their right to ask for a foreclosure review, says Office of the Comptroller spokesman Bryan Hubbard.
Last month, independent consultants hired by lenders also began combing industry data to look for mistakes in foreclosure cases handled by 14 of the nation's largest mortgage servicers: Bank of America, Citibank, JPMorgan Chase, Wells Fargo, Ally Financial, Aurora Bank, EverBank Financial, HSBC, MetLife, OneWest, PNC, Sovereign Bank, SunTrust Banks and U.S. Bancorp.
Reviews will take months to complete. The first consumers could see cases resolved this spring, according to deadlines imposed on the servicers.
Remedies will vary based on the degree of injury, said John Walsh, acting Comptroller of the Currency, in a speech last month.
The reviews cover homeowners in any stage of the foreclosure process on a primary home in 2009 or 2010. Anyone who meets that requirement — and was a customer of one of the 14 servicers — will get a review if they ask. The servicers include Bank of America, Citibank, JPMorgan Chase and Wells Fargo.
The reviews were ordered as part of federal enforcement actions announced in April after a federal investigation last year found "significant weaknesses" in mortgage servicer practices.
The actions include requirements that servicers change some foreclosure practices, such as giving distressed borrowers a single point of contact. But the foreclosure reviews are the "most ambitious and complex" aspect of the action, Walsh said.
The OCC, along with the Federal Reserve, will oversee the reviews.
Whether homeowners were wronged will be decided by independent consultants hired by the servicers but approved by regulators.
The consultants will also decide remedies, which will be spot-checked by regulators. Regulators have also instructed the consultants what errors to seek.
No estimate of cost to servicers has been provided.
One company will process claims and provide one website and telephone number for consumers wanting reviews, the OCC says. The information will be in the consumer letters.
The OCC hasn't released the names of the independent consultants. That is under consideration, Hubbard says.
Consumer advocates say more information, including the names of the consultants doing the reviews and exactly how the reviews will be done, needs to be public to assure fairness and thoroughness.
"The process does seem ambitious," says Alys Cohen, attorney of the National Consumer Law Center. "But we have a lot of questions."
Restitution could be required for a broad range of issues, including if homeowners:
•Paid impermissible fees or penalties.
•Paid too much or had payments misapplied.
•Were wrongly denied loan modifications.
•Were wrongly foreclosed upon.