The Board of Governors of the Federal Reserve System announced earlier this month that 10 mortgage servicing companies subject to enforcement actions for deficient practices in mortgage loan servicing and foreclosure processing have reached an agreement to pay more than $8.5 billion to help borrowers. Some of the information we’ve received is conflicting, so bear with me as I try to deliver it as it becomes available.
Under the new deal, every homeowner who received a foreclosure notice in 2009 or 2010 — about 4 million — will receive some share of $3.5 billion, regulators said. Eligible borrowers are expected to receive compensation ranging from hundreds of dollars up to $125,000, depending on the type of possible servicer error. The remaining $5 billion would pay for loan modifications and other homeowner assistance. However, the submission window is closed. Request for Review Forms were to be submitted no later than December 31, 2012. The Independent Review Administrator — Rust Consulting, Inc., is not able to accept any new Request for Review Forms past the deadline. Supposedly borrowers whose mortgage loan was serviced by one of the ten participating servicers and who were involved in a foreclosure action between January 1, 2009, and December 31, 2010, will receive compensation whether or not they filed a request for review form. Borrowers do not need to take further action to be eligible for compensation.
According to the Board of Governors press release 10 of the 27 mortgage servicers under review reached an agreement. The servicers are Aurora, Bank of America, Citibank, JPMorgan Chase, MetLife Bank, PNC, Sovereign, SunTrust, U.S. Bank, and Wells Fargo.
As a result of this agreement, the participating servicers would cease the Independent Foreclosure Review, which involved case-by-case reviews, and replace it with a broader framework allowing eligible borrowers to receive compensation significantly more quickly. The OCC and the Federal Reserve accepted this agreement because it provides the greatest benefit to consumers subject to unsafe and unsound mortgage servicing and foreclosure practices during the relevant period in a timelier manner than would have occurred under the review process. 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.
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 for receiving payment. In addition, the servicers’ internal complaint process will remain available to borrowers.
Homeowners may also contact a HUD-approved nonprofit organization that helps homeowners in distress. Information about HUD-approved nonprofit organizations that can provide free assistance is available at www.makinghomeaffordable.gov/get-started/housing-expert or by calling 1-888-995-HOPE (4673).
Sheri Aguilar is the president of the Lodi Association of Realtors and can be reached at Sheri@YourLocalAOR.com