Newspapers across our nation have been full of articles detailing bank foreclosure practices that have been abusive. It now looks like the federal government will attempt to respond to this foreclosure abuse. The Wall Street Journal has reported that federal regulators will review millions of foreclosure cases to determine whether some consumers should be compensated for mistakes made by banks (click here read the entire article).
The Journal reports that this review process could be unveiled in the next few weeks. The Office of the comptroller of the Currency estimates that 4.5 million borrowers coul be eligible for review.
The federal government will be setting up a website and a toll free number giving the details of the process.
What bothers me is that the reviews will be conducted “by third party companies that were hired earlier his year by 14 banks that signed consent order in April with the OCC and the Federal Reserve. The regulators had to sign off on the selection of these companies” (See page C1 Wall Street Journal, October 4, 2011).
It seems to be like the government has agreed to allow a fox to be in charge of guarding the hen house. I doubt we will see many people recover anything. I bet there will be a few token cases where awards will be granted so that the foxes can claim to the government that they are doing their job.
Important points of the article are:
1. Money awards will be determined on a case-by-case basis.
2. There will be a deadline for borrowers to request reviews.
3. Very few borrowers are expected to have their foreclosures overturned and their homes returned to them.
4. Banks could be held liable for miscalculating mortgage payments.
5. Banks could be held liable for impermissible fees and penalties.
6. Banks could be held liable for forcing expensive insurance coverage into the mortgage payment and pushing consumers into foreclosure.
7. Banks could be held liable for starting foreclosure proceedings while they were receiving payments as part of trial loan modifications.
8. Banks may be liable for foreclosing on people who provided all of the necessary documentation for loan modifications but still got foreclosed.
I think the proper place for these issues to be resolved is in a court of law and not some review process that will be run by “third party” companies.
Three years, Congress had the opportunity to pass a bill that would have allowed bankruptcy judges to modify mortgages. Had this bill passed, the entire foreclosure meltdown would have been avoided.