Independent Foreclosure Review gets another do-over

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Perhaps the real news would be the answer to this question: “Why won’t mortgage servicers simply abide by the original Independent Foreclosure Review order, give borrowers their due and help abused past and present homeowners move on?”

That would be too easy.

Federal agencies have replaced the Independent Foreclosure Review with what agencies say will be a faster, more streamlined process to correct abusive mortgage loan servicing and foreclosure processing practices, while continuing to compensate consumers for the wrongs.

With a deadline extended three times and last set to end Dec. 31, 2012, the Independent Foreclosure Review, not to be confused with the National Mortgage Settlement has been fraught with administrative problems.

The foreclosure review is a settlement for enforcement actions issued in April 2011 to correct faulty, abusive mortgage servicing and foreclosure practices.

Foreclosure review history

Back in 2011, the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision and the Board of Governors of the Federal Reserve System (Fed) required a group of mortgage servicers to retain independent consultants to conduct a comprehensive review of foreclosure activity in 2009 and 2010, to identify borrowers who may have been financially injured due to errors, misrepresentations, or other deficiencies in the foreclosure process.

Where there was documented financial injury, borrowers were eligible for lump-sum payments, suspension or rescission of a foreclosure in process, a loan modification or other loss mitigation assistance, correction of credit reports, or correction of deficiency amounts and records.

Lump-sum payments can range from a few hundred dollars to as much as $125,000, plus equity.

The Federal Reserve said in a recent release, those provisions are still in place under the new rule.

Mortgage servicers’ compliance with the new agreement would meet the requirements of the original enforcement actions that mandated that the servicers retain independent consultants to conduct an Independent Foreclosure Review.

New foreclosure review agreement

Under the new agreement, however, participating servicers will cease the Independent Foreclosure Review process.

Instead, eligible borrowers will receive compensation whether or not they filed a request for review form, and borrowers do not need to take further action to be eligible for compensation.

Under the old agreement, borrowers had to file a claim for a review on a case-by-case basis. That’s not necessary under the new process.

A payment agent will be appointed to administer payments to borrowers on behalf of the servicers. Eligible borrowers are expected to be contacted by the payment agent by the end of March with payment details.

Borrowers will not be required to execute a waiver of any legal claims they may have against their servicer, as a condition of receiving payment. This provision was put in place during one of the earlier extensions.

Also, servicers’ internal complaint process will continue to remain available to borrowers, under the new rule.

Most of the servicers in the original settlement have agreed to the new rules, but not all.

Federal agencies say they will continue to work to reach similar agreements with errant servicers and continue to monitor how servicers’ carry out requirements mandated to correct abusive mortgage servicing and foreclosure practices.

Stay up to date on the process at the Independent Foreclosure Review web site.

About the author

A DeadlineNews.Com Silicon Valley Contributing Writer, with a penchant for the quick, story-telling capability of infographics, Mark K. Hicks is broker/owner of The Seabrooke Group in San Jose, CA. Hicks, who takes a "client for life" approach to business, has more than 20 years real estate experience, including creative financing, foreclosure acquisition, probate sales and tax-deferred exchanges. Network with Hicks on LinkedIn.

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