Federal regulators tap banks to review own foreclosures for misconduct

After 14 months of a veritable “train wreck” of an analysis performed by independent consultants was finally halted by the U.S. Comptroller of the Currency (USCC), homeowners across the country struggling to keep their homes from being foreclosed upon breathed a sigh of relief. Surely, the government wouldn’t extend their anxiety any longer, right? Especially not after running through $2 billion of funds that had been earmarked to compensate homeowners for whom foreclosure actions had been either brought illegally or performed incorrectly. Right? Well, it turns out that the feeling of relief was short-lived. Federal regulators may have scrapped the independent analysis of mortgage procedures, but they have now given the responsibility right back to the banks who caused the foreclosure crisis in the first place. That move – announced in mid-February 2013 – has fair-housing advocates and countless homeowners crying foul amid concerns that still-faltering homeowners are yet again left in financial distress.

The independent review

This is what should have happened: independent financial consultants were brought in by regulators at the USCC to determine the level of compensation that was appropriate for individual homeowners who had been affected by the improper actions of mortgage lenders. In the broadest sense, homeowners fall into two major categories:

• Mistaken/improper foreclosure where the home foreclosed upon had actually already been paid off (i.e., there was no mortgage at all) or the payments were not past due
• Incorrectly/illegally performed foreclosures like those involving the practice of “robo-signing” or where no notice was given to the homeowner that foreclosure proceedings had begun

What actually happened, though, was that the consultants got through only a tiny fraction of the countless foreclosures identified as problematic. Struggling homeowners have either received no compensation during that time, or not nearly enough to make them financially whole again.

Starting fresh

Instead of going through the process again with a different set of consultants or handling the analysis themselves, the USCC is trying a novel approach: making the banks investigate their own foreclosure files to search for irregularities, incorrect filings, illegal activity or other issues that would warrant compensating the homeowner. Many legal experts and homeowner advocacy groups see this as akin to the “inmates running the asylum.” Even if the banks fully intend to address the problems with each and every wrongful foreclosure action they find, affected homeowners likely have a hard time putting trust in the same companies that were – in some cases still are – trying to foreclose their mortgages. The banks have shown some signs that they are dedicated to revamping the antiquated foreclosure process that has ensnared countless homeowners during the so-called “Great Recession” that our country is still trying to rise above. For example, nearly all the major lenders (Bank of America, JP Morgan, Chase and more) voluntarily instituted a months-long moratorium on foreclosure proceedings to perform internal audits to check for illegal or improper practices. Since the USCC has just given the responsibility back to the banks for oversight, only time will tell when lenders will make headway towards getting struggling homeowners the financial relief they need. It may very well be a case of “too little, too late” for some, but hopefully other homeowners will be able to turn around their financial situations. If you are dealing with improper or unfair foreclosure proceedings and are struggling to stay afloat financially, consider speaking with a skilled wrongful foreclosure attorney in your area to learn more about your legal rights and options you may have to stay in your home.