Foreclosure review process affecting 4.5M consumers begins

— -- The federal government kicked off its foreclosure review process Tuesday, which will offer nearly 4.5 million consumers the chance to get their foreclosure cases reviewed for mistakes and potential restitution.

The first batch of letters informing consumers of their right to a review went out Tuesday. They'll all go out by Dec. 31, the Office of the Comptroller of the Currency says.

A website has also been set up at www.independentforeclosurereview.com. Consumers can call 1-888-952-9105.

The foreclosure review — covering foreclosure actions taken by 14 mortgage servicers and their affiliates in 2009 or 2010 — was ordered by federal banking regulators in April after an investigation found significant weaknesses in mortgage servicing and foreclosure processes.

The individual reviews, which consumers must request no later than April 30, could take months to complete. They will cover foreclosure actions against primary homes only.

Not every homeowner is expected to receive compensation and remedies could vary substantially based on the severity of harm, regulators say.

If a foreclosure sale is scheduled and a review is underway, the sale will be postponed until the review is complete, says Bryan Hubbard, OCC spokesman.

The letters will inform consumers of their right to a review and include a form to request a review.

The reviews mark the most ambitious enforcement effort so far since revelations last fall that many foreclosure cases had been improperly handled.

Eight independent consulting firms, hired by the servicers but approved by regulators, will do the reviews and decide on restitution.

Decisions are final, the government says. Federal regulators will monitor the consultants.

OCC official Joe Evers says the reviews will be fair and thorough.

But consumer advocates say the process needs to be more transparent, especially since the reviews will be done by consultants paid for by the mortgage servicers.

Consumer groups were not consulted about how the reviews should be done, says Alys Cohen, of the National Consumer Law Center.

"It's clear that the process is closed," she says.

The NCLC has advocated that the consultants' names be released. Hubbard said Tuesday that they will be when progress reports on the review are published.

Foreclosure actions that could lead to a review include loss of a home through a foreclosure judgment.

But other homeowners would be eligible for reviews, too, including those who entered the foreclosure process but then brought loans current, modified them or completed short sales or deed-in-lieu deals.

People currently in the foreclosure process could also be eligible as long as they entered that process in 2009 or 2010.

Affected servicers include leaders such as Bank of America, Chase and Wells Fargo.

The types of things reviewers will be looking for include whether:

•Mortgage balances were figured correctly.

•Foreclosure actions occurred while consumers were protected by bankruptcy laws.

•Foreclosure sales occurred even though homeowners were in compliance with a modification agreement.

•Fees were inaccurately calculated or applied.