The Federal Reserve Board of Governors (the Fed) is checking up on mortgage lender compliance with regulations controlling foreclosure misconduct the Fed identified at ten banks (including Bank of America, Wells Fargo, JP Morgan Chase and Citibank) during the Fed’s November 2010 foreclosure review.
In addition to requirements issued in April 2011, each of the ten lenders must now participate in the Borrower Outreach Program — a process designed for the receipt and review of homeowner complaints and inquiries.
The program, announced in November 2011, gives homeowners the opportunity to have their foreclosure independently reviewed for lender errors or misrepresentations in noncompliance with state and federal foreclosure laws. Each lender must hire a Fed-approved independent consultant to review individual foreclosure actions and determine whether homeowners suffered financially as a result of lender errors or misrepresentations. Lenders will then submit their plans to correct errors and prevent future misconduct for Fed approval.
As always with federal mortgage rules, a window period exists to restrict consumer participation. Only those homeowners whose primary residence was in foreclosure during 2009 or 2010 may request their file be reviewed, whether or not the foreclosure was completed. Homeowners with current issues about foreclosures started after 2010 need not apply.
Lenders have begun mailing information about how to request a foreclosure review to this two-year category of homeowners. A homeowner may apply for a review of their foreclosure by calling 1-888-952-9105 or going to www.IndependentForeclosureReview.com
first tuesday take: Thus far, the government’s attempts to regulate lenders — or rather let lenders regulate themselves — have been laughable. At least this one mandates participation, a vital first step in getting mortgage lenders to actually do something.
Since the 1930s when more humane treatment of our population by lenders was legislated, the rule for government agency conduct has become clear: it is the regulated that regulate the regulators.
The latest sunlight cast on regulators and their exclusionary waltz with those they regulate emanates from the judicial arm of the government, the target agency being the ineffective Securities and Exchange Commission (SEC). The Federal Housing Administration (FHA), Fannie Mae, Freddie Mac and the Department of Housing and Urban Development (HUD) need huge amounts of sunlight 24/7 ASAP to kill off this contagious arrangement; the regulated regulating the regulators.
If the Fed really means business, penalties for failing to obey the law would include withdrawal of a violating bank’s access to the Fed’s credit facilities, a banker’s current life blood. That would get the bankers’ collective attention. [For more information regarding the November 2010 foreclosure review, see the April 2011 first tuesday article, Mortgage servicers to regulate…themselves?]
Going forward, the Fed’s Borrower Outreach Program has the potential to at least mitigate unwarranted foreclosures brought about by lender misrepresentation (deceit), even though the vague “monetary penalties” for noncompliant lenders may not be due recourse (read: civil or criminal justice) for skirting the law.
Similar to the mortgage complaint webpage recently launched by the Consumer Financial Protection Bureau (CFPB), the Fed’s effort to protect homeowners from lender misconduct will likely result in a dull (if noticeable) slap on the wrist. [For more information regarding consumer protection programs, see the December 2011 first tuesday article, Better lender bureau will accept your mortgage grievance.]
Agents: keep an eye out for mortgage lender advertising campaigns and mailers to your clients who were in foreclosure during 2009 and 2010. Ask them questions about failed promises made by their lenders, and then encourage their participation in these programs.
As you get better informed, spread the news to the community of negative equity homeowners about the Borrower Outreach Program and its effort to locate lender misrepresentations through your use of FARM letters, social networking efforts and communication with clients. That’s how you go viral and brand yourself.
Re: “Statement on the foreclosure review process” from the Board of Governors of the Federal Reserve System