The so-called “Independent Foreclosure Review” was tweaked Monday to allow borrowers to receive compensation for loan servicing wrongdoings in a more expeditious manner.
As a result of the latest agreement between the Treasury, OCC, and 10 mortgage servicing companies, the Independent Foreclosure Review will be replaced with a “broader framework.”
The new system will ensure that affected borrowers receive compensation regardless of whether they filed a “request for review form,” which was a key component of the original process.
In fact, borrowers don’t need to take any additional action to be eligible for compensation, and should expect to be contacted by a payment agent by the end of March to discuss payment details.
Additionally, receiving compensation doesn’t waive any legal claims borrowers may have against their loan servicers. And each servicer’s internal complaint process will still remain available to affected borrowers.
The following servicers are part of the Independent Foreclosure Review 2.0:
- Bank of America
- JPMorgan Chase
- MetLife Bank
- U.S. Bank
- Wells Fargo
They have agreed to provide $3.3 billion in direct payments to eligible borrowers, and another $5.2 billion via loan modifications and forgiveness of deficiency judgments.
Of course, the amount of compensation is expected to vary widely, from as little as a few hundred dollars to as much as $125,000, depending on the magnitude of the “error.”
Eligible borrowers include those with loans serviced by the aforementioned companies whose primary homes were in foreclosure in 2009 and 2010.
The original agreement included several more companies, including Countrywide, EMC, HSBC, IndyMac, National City, Wachovia, and Washington Mutual.
As you can see, many of these names are now obsolete, pushed to the brink thanks to high-risk lending that led up to the now infamous mortgage crisis.
Other Loan Servicers May Soon Join
The OCC and Treasury said it is continuing to work with other major servicers involved in shoddy foreclosure practices, such as robosigning, to reach similar agreements.
Under the previous Independent Foreclosure Review, which was announced all the way back in 2011, borrowers had to submit a complaint to their lender or loan servicer on a case-by-case basis.
A review would then be conducted by an independent consultant to determine any financial injury related to foreclosure proceedings.
Examples of financial injury include dual tracking, where servicers continued to pursue foreclosure even while borrowers attempted to modify their loans, or where fees and/or mortgage balances were higher than what was actually owed.
In hindsight, it wasn’t the most effective way of serving the millions who experienced foreclosure during those years, and clearly wasn’t the most cost efficient method.
Bank of America Cleans Up Countrywide Mess
Could 2013 be the year of the great mortgage cleanup? So far it looks that way.
Bank of America also announced yesterday an agreement with Fannie Mae to resolve any issues with bad loans it sold to the government-sponsored entity.
The Charlotte-based bank said it would make a cash payment of $3.6 billion to Fannie while also repurchasing $6.75 billion in residential mortgage loans sold to the company.
Bank of America will also make a cash payment to Fannie to settle future claims for compensation arising out of past foreclosure delays.
And the bank announced the sale of servicing rights of roughly two million mortgages with an aggregate unpaid balance of $306 billion to Nationstar and Walter Investment Management Corp.
The sale includes 232,000 first mortgages classified as 60+ days delinquent.
Bank of America said it held 775,000 such loans as of December 31, 2012, down from 936,000 loans at September 30, 2012.
Once these sales are complete, those numbers will fall dramatically and the Bank may finally be able to look forward.