Roughly 17 million foreclosure filings were sent out between 2007 and 2011 according to RealtyTrac, the foreclosure listings and data resource.
While a lot of default notices, scheduled auctions and bank repossessions were sent out, some were wrong and as a result the government has instituted a Independent Foreclosure Review that gives abused borrowers a chance to make claims against lenders.
By the end of May the government had sent out nearly 4.4 million letters and forms to would-be claimants and scheduled more than 330,000 reviews. If a reviewed claim turns out to be correct borrowers can receive lump sum payments from $500 to as much as $125,000 plus lost equity.
You might think in any review of lender practices that there would be input from borrowers. However, the GAO flatly says that the Federal Reserve and the Office of the Comptroller of the Currency sought no advice from consumer groups. One result was that the “readability tests found the initial outreach letter, request-for-review form, and website to be written above the average reading level of the U.S. population, indicating that they may be too complex to be widely understood.”
Hurdle for foreclosed owners
So even if you were lucky enough to get a review letter the odds are pretty good that it looked like an official communication from the Babylonian Empire. The GAO says that “borrowers may have ignored communication materials because they did not understand who provided the information and believed the materials were fraudulent.”
But if there is to be a review process it would be good to know who is doing the review process and what the rules are.
The GAO report is interesting but misses the point. The much bigger issue is that the review process is a complete mystery, there’s no explanation telling borrowers exactly what happens once a claim is submitted.
The Independent Foreclosure Review site explains that “if your request meets the eligibility requirements, it will be reviewed by an independent consultant.”
That’s great — but who is the independent consultant? Who selected this person? What are their qualifications? Does the borrower have any right to object? If the review process is independent from whom is it independent? It certainly seems independent from public input.
These questions are enormously important for the same reason that the selection of the judge at any trial a significant. If the independent consultant rules against the borrower there is no recourse.
“The decision of the review is considered final and there is no further recourse within the Independent Foreclosure Review process,” says the review site. “The Independent Foreclosure Review will not have an impact on any other options you may pursue related to the foreclosure process of your mortgage loan.”
The failure to get satisfaction from the review process may not impact other options available to the borrower but it is not without importance. For example, what information is being collected about the borrower and the lender and how is that information being used? Who, if anyone, is doing the collecting? Could information from the review process be used against the borrower?
The review process has been hurt not just by incomprehensible letters but by a process which is entirely murky. Why should the public have confidence in a foreclosure review system which is unclear and unexplained?
The failure to get satisfaction from the review process may not impact other options available to the borrower but it is not without importance. For example, what information is being collected about the borrower and how is that information being used? Who, if anyone, is doing the collecting?
The foreclosure review process has been hurt not just by incomprehensible letters and explanations but by a process which is entirely murky. Why should the public have confidence in a foreclosure review system which is unclear and unexplained? Or should the public just accept it — like the LIBOR rate?
The Independent Foreclosure Review is not to be confused with the National Mortgage Settlement, although both stem from the same kind of abusive foreclosure practices.
For more background information see: Independent Foreclosure Review on DeadlineNews.Com.