Victims of foreclosures from 2009 to 2010 will finally get their chance to have their cases heard, as the federal government today kicks off its federal foreclosure review process.
The process will involve a host of independent consultants who will review residential foreclosures on primary residences over those two years for any irregularities, improprieties, or illegal practices that may have led to wrongful foreclosure. In the event that wrongful foreclosure is discovered, restitution for the former homeowners may be forthcoming.
Each case could take months to finish, and homeowners have until April 30th of next year to file a claim for a review. Review results are final.
The move comes six months after federal regulators, in an attempt to address serious allegations of widespread foreclosure abuse, ordered up to 4.5 million foreclosures to be reviewed. They then approved a slate of eight independent consultants nominated and paid for by 14 of the largest loan servicers from across the nation, who will conduct the reviews under the supervision of the regulators.
It is not clear what form of restitution will be offered to homeowners who were wrongfully foreclosed on, and not every homeowner will receive something in return. The stipulation of primary residences only also means that many foreclosed homes currently are exempt from the review process.
What troubles most critics is the fact that consultants, while being approved by federal regulators, are first hired by those eight consulting firms. They are also concerned that the process is not sufficiently open and transparent for fairness – a fair criticism, taking into account the shady practices that resulted in the review being mandated in the first place.
As far as the impact on the housing market is concerned, this move will do little to directly reduce the rate of foreclosures flowing into the market. Sheriff sales will still be scheduled and homes will still be repossessed. The main difference is that former homeowners who were wrongfully evicted will have something in the way of restitution – with the hope that lenders and servicers will be far less likely to engage in the same unfair practices as before in the future.
One good note: Those who are currently being foreclosed on can enter into a review, which will stop foreclosure until the review is completed. This could potentially help some homeowners keep their homes, but that is by no means a given. The main benefit is the help to former homeowners who unfairly had their homes taken away.