Feds Extend Deadline for Reviewing Defective Foreclosures
If you’ve lost your home to foreclosure or your home is “underwater” (you owe more on your mortgage than your home is worth), and you believe it’s because your lender messed up, you’ve got just two more months to apply to the federal government for help.
The Office of the Comptroller of the Currency and the Federal Reserve Board offer a program called Independent Foreclosure Review to people who have lost money or their homes because of errors by banks in foreclosure actions during 2009 and 2010. On June 21, the agencies announced an extension of the deadline to file for the free review: instead of the end of July, you now have until September 30, 2012.
Two months seems a bit short, given the popularity of the program. Over 200,000 borrowers have already requested a review. “They may want to give more people the opportunity to have their foreclosure reviewed,” observes Todd B. Allen, a real estate lawyer in Naples, FL with Goede & Adamczyk, PLLC. “Although I think two months isn’t nearly enough time. It’s an odd amount of time to extend the program and it doesn’t seem to have any basis.”
Guidance on Errors, Remedies Also Issued
In addition to the wonky deadline extension, the feds also announced the release of guidelines they will use in figuring what kind of fix they’ll offer you – if they find an error. The error review process itself can take months, according to the agencies. Here are some of the basic errors and problems the feds will look for if you submit your foreclosure for review:
- foreclosing on a borrower in violation of the Servicemembers Civil Relief Act
- foreclosing on a borrower who was not in default on the mortgage
- failing to convert a qualified borrower to a permanent modification after successful completion of a written modified payment plan
- foreclosing on a borrower prior to expiration of a written modified payment plan
- denying a borrower’s loan modification application that should have been approved
- failing to offer loan modification options as required by an applicable program
- giving a borrower a loan modification with a higher interest rate than should have been charged
- foreclosing on a borrower in violation of federal bankruptcy laws
- not providing a borrower with proper notification during the foreclosure process
- committing errors that resulted in other financial injury
Possible remedies for these errors could include:
- lump-sum payments, ranging from $500 to $125,000 plus equity
- suspension or rescission (reversal) of a foreclosure
- a loan modification or other loss mitigation assistance
- correction of credit reports
- correction of deficiency amounts and records
But don’t expect a miracle. If you lost your home in 2009 or 2010, getting that foreclosure reversed in what is known as a “rescission” is not likely. “Rescission of a foreclosure is a possible remedy, but it is an extraordinary remedy,” says Allen. “The procedures a court would have to go through to reverse a foreclosure are pretty difficult.” Things get even more complicated if your property was already sold to a third party in a foreclosure sale. “I have yet to see a foreclosure completely rescinded,” he says.
Banks Play Nice, for Now
And while the banks who are being forced to participate and remedy their errors are cooperating – “They can’t afford another black eye, so they need to look like they are working with homeowners,” notes Allen – they can’t be happy about it, and it might only be a matter of time before the program is challenged in court.
“There are certainly issues of usurping the court’s authority when an agency tries to reverse a foreclosure,” Allen allows. “After the foreclosure is complete the bank has a judgment. According to the laws of the state, that judgment is valid. If the bank, homeowner and agency are going to work out a foreclosure reversal, someone needs to get approval from the court.”
There’s also the possibility that banks are getting hit twice for the same errors. The same banks – Bank of America, J.P. Morgan Chase, Citigroup, Wells Fargo, and Ally Financial (formerly known as GMAC) – that are subject to the review program agreed to a $25 billion settlement in February 2012. That landmark case settled charges that the banks routinely approved loans without checking their facts, a practice known as “robo-signing.”
So get in while the gettin’s good, before the next crisis (this is an election year, remember!) switches public attention away from the plight of homeowners. The extension of the deadline “is an indication that the real estate market is still suffering,” Allen says. “The number of homeowners in the country who are at least 30 days delinquent on their mortgage payments does not seem to be decreasing.” He points to a recent report by the Center for Responsible Lending, which indicates that one in three California homeowners are underwater, meaning they have mortgages that exceed the current value of their homes.
If you believe your lender committed an error in foreclosing on your mortgage, you can apply for the review program online. You should also contact a foreclosure lawyer in your city and state on Lawyers.com to find out more about your options.