US regulators extend foreclosure review deadline
* Foreclosure errors could get homeowners more than $125,000
* Banks have hired consultants to review mortgage files
* Deadline for requesting file review extended through September
By Dave Clarke
WASHINGTON, June 21 (Reuters) - Homeowners who were wrongfully foreclosed upon in 2009 or 2010 could receive more than $125,000 each from large U.S. banks under plans released on Thu rsday by banking regulators.
The new guidelines from the Federal Reserve and the Office of the Comptroller of the Currency are intended to provide more clarity about what constitutes an error during a foreclosure and how much a mortgage servicer should pay for harming a homeowner.
As part of an April 2011 settlement with the agencies, 14 mortgage servicers, among them many large banks, are required to hire consultants to review foreclosure actions taken in 2009 and 2010 to see what errors may have occurred.
Homeowners who suffered as a result of a foreclosure error have to be compensated under the agreement.
Lawmakers and consumer groups have pushed regulators since the reviews were launched last year to provide more details about how this compensation process will work.
The agencies said on Thursday that borrowers could receive anywhere from $500 to $125,000, plus the equity they had in a home, depending on the size of the error.
For instance, if a borrower was not in default but was the subject of a foreclosure that has been completed, he would get the largest allowable amount from the servicer.
Smaller penalties would be paid for such things as wrongfully denying a borrower the ability to apply for a loan modification.
Federal regulators and state attorneys general over the past two years have focused heavily on problems in the mortgage servicing industry. Mortgage servicers collect payments and process foreclosures.
The servicing issue burst into public view in late 2010 when government agencies began investigating bank mortgage practices, including the use of "robo-signers" to sign hundreds of unread foreclosure documents a day.
In April 2011, 14 mortgage servicers, including Bank of America and JPMorgan Chase & Co, entered a settlement with the Fed, the Office of the Comptroller of the Currency and the now-defunct Office of Thrift Supervision on steps to correct and improve their servicing practices, such as providing borrowers with a single point of contact for questions.
Five large banks also entered a separate $25 billion settlement in February with state attorneys general and the Justice Department over servicing problems.
Under the agreement with the Fed and OCC, the consultants hired by the servicers must search for foreclosure errors. Homeowners can also ask to have their cases reviewed.
Regulators have been trying to get the word out about this option and o n T hursday announced they were once again extending the deadline for borrowers to request a review. The deadline is being moved from July 31 to September 30.
As of the end of May, regulators had sent about 4.4 million letters to homeowners who are eligible to have their cases reviewed and so far 193,630 reviews have been requested.
The number of mortgage files scheduled for review totals 338,447, including those files selected by the consultants.
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