It was intended to offer hope and help for individuals and families facing foreclosure of their primary residence. Instead, the Foreclosure Review Program is facing tough scrutiny and criticism from consumer advocates and politicians alike.
The program was launched in response to findings by federal regulators last spring. These findings indicated that many mortgage companies, including well-recognized banks such as Chase, Bank of America and Wells Fargo, had engaged in "unsafe and unsound" practices such as:
- Inflating mortgage balances
- Charging unnecessary fees
- Foreclosing during bankruptcy
To provide remedy to homeowners whose primary residences went into foreclosure between January 1, 2009, and December 31, 2010, the Federal Reserve System, the Office of Thrift Supervision and the Office of the Comptroller of the Currency initiated the independent review program. This program offers qualified customers the opportunity to have a free, independent review of their individual foreclosure cases. If reviewers find that the homeowners were victimized by fraudulent foreclosures, these customers may be eligible to receive financial compensation.
To qualify, homeowners must meet eligibility criteria such as having a home loan serviced by one of the participating mortgage providers. Additionally, the loan must have been active in the foreclosure process within a specific window of time.
Though the review program sounds promising, consumer advocates are voicing concern. With advertisements and public service announcements aired and printed in only English and Spanish, critics believe many potentially eligible people may be excluded. Further concerns involve the waiving of rights: if borrowers accept compensation through the independent review program, they are required to sign away their legal right to future claims.
Other concerns have been addressed by the media. For example, New York Times reporter Gretchen Morgenson has called into question conflict of interest issues since the "independent consultants" who conduct the reviews are chosen by the banks that are paying them. Politicians have also voiced concern.
In an October letter sent to the Office of the Comptroller of the Currency (OCC), Maxine Waters (D-California) said, "the only thing worse than no accountability for the banks is for regulators to create the illusion of accountability while putting no enforcement behind the efforts. Later, in a Senate subcommittee hearing in December, Robert Menendez (D-New Jersey), Jeff Merkley (D-Oregon) and Jack Reed (D-Rhode Island) expressed doubts about the program and the potential for conflicts of interest.
The OCC has acknowledged concerns and criticism through its spokesman and through the testimony of its chief counsel.
