By Sean Coffey, MPA, Program Manager of ForeclosureHelpSCC

It is now official, the Independent Foreclosure Review program is being replaced with a program that will provide direct cash payments to homeowners that were foreclosed on inappropriately between 2009-2010.

According to a Federal Reserve press release: “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. “

Is this a success?  It’s difficult to say.  The administration of the Independent Foreclosure Review, and the outreach to eligible borrowers was roundly criticized, so this may be a better way to actually get the money to people who dealt with robo-signing issues.  For example, our program was still receiving phone calls from people after the December 31 deadline, asking how they could apply for the Independent Foreclosure Review.

Comments on our petition also highlighted the weaknesses in the outreach of the program, with one homeowner explaining that the letter she received looked like a scam letter, so she had tossed it aside until she saw a news program about the Independent Foreclosure Review the night before the deadline.

On the other hand, there is also a question about the actual amount of compensation that homeowners will receive.  Gretchen Morgenson at the New York Times (“Surprise, Surprise, the Banks Win” January 5, 2013) suggests that depending on the number of people who receive the compensation, this may not be as beneficial to individual homeowners as the money they could have received from the Independent Foreclosure Review:

Some back-of-the-envelope arithmetic on this deal is your first clue that it is another gift to the banks. It’s not clear which borrowers will receive what money, but divvying up $3.75 billion among millions of people doesn’t amount to much per person. If, say, half of the 4.4 million borrowers were subject to foreclosure abuses, they would each receive less than $2,000, on average. If 10 percent of the 4.4 million were harmed, each would get roughly $8,500.

This is a far cry from the possible penalties outlined last year by the federal regulators requiring these reviews. For instance, regulators said that if a bank had foreclosed while a borrower was making payments under a loan modification, it might have to pay $15,000 and rescind the foreclosure. And if it couldn’t be rescinded because the house had been sold, the bank could have had to pay the borrower $125,000 and any accrued equity.

As a reminder, a study released in November 2012, found that 800,000 more homeowners should have qualified for the HAMP program, except that a few large banks and servicers were not modifying mortgages at the same rate as their more efficient peers.

ForeclosureHelp will continue to post information on our blog as we receive updates, but as of right now, it looks like March 2013 will be one of the big dates with this new settlement, when a payment agent will be appointed.

We are also hopeful that information for homeowners who had their loans serviced by Litton Loan Servicing and Saxon Mortgage will soon be posted to the Independent Foreclosure Review website.

If you are a homeowner living in San Jose or Sunnyvale and are struggling with your mortgage, please contact ForeclosureHelpSCC, a program funded by the City of San Joseand the City of Sunnyvale at (408)-293-6000 or visit our website: www.foreclosurehelpscc.org.   Our HUD-approved counselors can help you evaluate your options, learn more about federal and state programs that may help you with your mortgage issues, and will help you create a plan forward.

Please note: All content included in the ForeclosureHelpSCC blog is provided for information only and should NOT be considered legal or tax advice. If you have any questions, please feel free to contact us on our hotline: (408)-293-6000, or visit our website: www.foreclosurehelpscc.org or send us an email: help@foreclosurehelpscc.org.

Si usted es dueño de una casa en San José o en Sunnyvale y están luchando con su hipoteca, por favor póngase en contacto con ForeclosureHelpSCC, un programa financiado por la ciudad de San José y la ciudad de Sunnyvale, al (408) -293- 6000, o visite nuestro sitio: www.foreclosurehelpscc.org. Nuestros consejeros aprobados por HUD puede ayudarle a evaluar sus opciones, aprender más acerca de los programas federales y estatales que pueden ayudarle con sus problemas de hipoteca, y le ayudará a crear un plan para seguir.

Por favor, tenga en cuenta: Todos los contenidos incluidos en el blog ForeclosureHelpSCC se proporciona únicamente a título informativo y no debe ser considerada como consejo legal o fiscal. Si usted tiene alguna pregunta, por favor no dude en contactarnos a nuestra línea directa: (408) -293-6000, o visite nuestro sitio:www.foreclosurehelpscc.org o envíenos un correo electrónico: help@foreclosurehelpscc.org.