Borrowers Denied ‘Fair Opportunity’ for Foreclosure Reviews: GAO

Both bank regulators and mortgage servicers failed to provide borrowers eligible for foreclosure reviews an easy-to-understand letter with specifics on potential compensation, according to the General Accountability Office.
A lack of effective communication with borrowers and insufficient feedback from consumer groups led to a denial of a “fair opportunity” for foreclosure victims to request an independent review, said the GAO, the nonpartisan Congressional watchdog.
As of May 31, regulators say that 338,447 foreclosures filed in 2009 or 2010 are scheduled to be reviewed for errors and possible compensation for homeowners, under the so-called Independent Foreclosure Review led by the Office of the Comptroller of the Currency (OCC).
But that figure represents only 8 percent of the 4.4 million borrowers who received letters from U.S. regulators several months ago informing them that they could receive compensation from “errors, misrepresentations, or other deficiencies in foreclosure proceedings,” the OCC has said.
Eligible borrowers have to return their “Request for Review” forms by the end of July.
The poor response is a result of poor preparation by mortgage services and regulators, the GAO said.
“Neither the servicers nor the regulators conducted readability testing or focus groups with the target audience of eligible borrowers, and regulators initially did not solicit input from consumer or community groups familiar with these borrowers,” the GAO said in its report on the Independent Foreclosure Review.
Bank regulators overseeing a review of foreclosures from 2009 and 2010 have outlined potential compensation for wrong homeowners that runs up to $125,000 if a foreclosure cannot be rescinded.
But the GAO said that the communications with borrowers “do not include specific
information about the potential types or amounts of remediation borrowers may receive.”
The materials sent to foreclosure victims were written at a “high reading level” which some eligible borrowers might have had difficulty understanding, the GAO said.

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