What is This?! Consumers Befuddled by Foreclosure Review Letters

August 05, 2012 (Press-News.org) As part of the settlement reached between the federal government and the 14 largest U.S. banks involved in wrongful foreclosures, a program was established to help homeowners obtain independent reviews of their cases. Depending on the extent of errors discovered, those wrongfully foreclosed upon could receive $500 to $125,000.

Under the consent orders issued by the Office of the Comptroller of Currency (OCC), the Federal Reserve Board, and the Office of Thrift Supervision (OTS), engagement letters were sent to affected homeowners to notify them about their rights and invite them to participate in the review program.

Unfortunately, the program has not exactly gone according to plan. Of 4.3 million notice letters sent to foreclosure victims, less than five percent (approximately 214,000) of former homeowners have requested reviews of their cases. A number of issues contributed to the low response rate. First, many people were unable to understand the letters and were utterly confused about what to do with them. For example, the opening paragraph from Bank of America's engagement letter began:

This letter, if acceptable to and countersigned by you, and upon approval by the Office of the Comptroller of the Currency ("OCC"), will serve as the agreement (the "Agreement") between the Bank of America Corporation and Promontory Financial Group, LLC ("Promontory") governing Promontory's conduct of the Foreclosure Review required by Article VII of the Consent Order entered into by the Bank of America, National Association (together with Bank of America Corporation, "BAC") and the OCC on April 13, 2011 (the "Consent Order").

The letters contained long, meandering descriptions of the prior federal investigation and included a number of densely worded attachments. Nevertheless, the letters did not clearly explain the review process or what would be required from applicants who chose to participate.

Second, a majority of letters were sent to homeowners' former home addresses instead of their current residences. Many had moved on without providing a forwarding address, and others had relocated more than once after losing their homes. Because of this, housing agencies had considerable difficulty locating people who could participate in the program. To make matters worse, the letters were only printed in English. This was an additional barrier for Spanish-speaking and other non-English speaking applicants.

The Government Accountability Office (GAO) recently released a report confirming these issues. It found that the letters' complex language, omissions about monetary awards and the failure to consider non-English speaking recipients all contributed to low returns. The letters, along with the corresponding website, were apparently not tested with target audience before they were released. Consumer advocacy groups bemoaned the engagement letters as being part of an overriding scheme for banks to save money; much like how insurance companies operate. By making the claims process difficult and time-consuming, fewer cases would be reviewed and less money would be paid out for wrongful foreclosures.

An OCC spokesman recently announced that the agency is in the process of revamping the letters to make them consumer friendly. In meantime, homeowners who suspect that they were victims of wrongful foreclosures should consult an attorney to learn about their rights and options.

Article provided by David J. Rausa
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