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Independent Foreclosure Review – More Questions than Answers

Independent Foreclosure Review – More Questions than Answers

The Office of the Comptroller of the Currency, one of the federal regulators overseeing the banking and lending industry, announced the launch of a complaint process for borrowers who believe they were unfairly or improperly foreclosed upon by servicers. The program is part of a consent decree negotiated between the OCC and servicers earlier this year. The program is known as the Independent Foreclosure Review. Lakeside CDC staff attended a conference call on the program on November 1, organized by the Housing Policy Council, an industry-sponsored group tasked with communicating about the program to borrowers, housing agencies, and others.

Here is what we learned:

1. Borrowers "in any stage" of the foreclosure process in 2009 and 2010 are eligible for review. This includes any borrowers, regardless the outcomes.

2. The program will attempt to contact eligible borrowers through direct mail, public outreach, and advertising campaigns. Details on these efforts were not provided. Advocates are rightly concerned that many borrowers will be hard to reach because they have moved or in some cases, may have died.

3. 14 major servicers have agreed to participate, covering an estimated 4.5 million loans that were serviced during the time period. Loans that were serviced at any time during 2009 and 2010 by one of the covered servicers are eligible, even if servicing was or has been transferred to another non-participant servicer.

4. The reviews will generally consider whether borrowers received incomplete or inaccurate information, long delays, or other bad treatment by the servicer. The specific details of what constitutes grounds for a complaint remain to be seen. It appears that any borrower with any complaint is invited to ask for a review.

5. An as-of-yet unnamed independent reviewer will review all applications and seek to determine if the borrower was harmed. The reviewer is a consultant retained by the servicers, but operating independent of the servicer. The consultant will report findings to the OCC and the servicers will be required to come up with a remediation plan, which can include compensation to the borrower.

6. A borrower will apply for review using a standardized 5-page form, which is available online. The form will need to be completed and submitted by mail. Once an application is submitted, the borrower will likely have to produce documents to support his/her claim. THERE IS NO COST TO APPLY AND BORROWERS ARE STRONGLY CAUTIONED TO AVOID SCAMS FROM PEOPLE CHARGING FOR APPLICATION SERVICES.

7. A website with information is available: Here is a link to the site FAQ page.

8. It is unclear how long a review may take, but estimates are at least several months. The application process will be open until July 31, 2012, according to the Office of the Comptroller of the Currency.

Advocates on the conference call expressed many concerns about the program, including the overall lack of detail. One advocate phrased it best, saying the announcement of this program, while so much has yet to be ironed out, seems "premature."

It was also made clear that while $25 billion has been set aside to fund the program and pay out claims, NO FUNDS WERE SET ASIDE TO PAY FOR COUNSELING SERVICES.

Lakeside is examining how best to support the program's goals, given scarce agency resources to support these efforts. If you are a current or past client whose loan was at any stage in the foreclosure process during 2009 and 2010, please review the program guidelines and consider submitting an application.

We will provide additional information as it comes available to us. If you have any questions, please contact Lakeside CDC at (773) 381-5253.

Updated November 1, 2011

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