Federal regulators review millions of foreclosures

Federal regulators have launched a nationwide review process to determine whether lenders legally and fairly conducted millions of home foreclosures. This week, authorities started sending notices asking people who lost homes in foreclosure to apply for a review.

Homeowners have until the end of April to return their applications for foreclosure reviews before business consulting firms like PricewaterhouseCoopers and Ernst & Young follow up on the foreclosures.

In 2010, federal regulators randomly selected several major loan "servicers" (companies who collect, monitor and report loan payments) and asked to see a handful of their foreclosure files. What they saw, they didn't like.

As a result, regulators have asked servicers like Wells Fargo, Chase Bank and Bank of America to send out notices to homeowners who lost their homes between 2009 and 2010, essentially asking them, what happened?

"So the burden is on the homeowner to figure out if the process was done wrong by the servicer," says Pat Pinto, manager of the foreclosure mitigation unit at the Orange County Legal Aid Society. "The homeowner has to fill out this application and say, yes, the servicer did something wrong — but how would a homeowner know if a servicer violated state or federal laws?"

Pinto sees several more-than-likely problems with the questionnaire method, not the least of which is the fact that homeowners don't actually know what they'll be compensated.

"Will they pay them a hundred dollars? A thousand dollars?" asks Pinto. "What is the proper compensation for losing your home? For uprooting your family, for moving away? You’re taking your children out of school; [they're] losing their friends, losing their teachers, you're losing your doctors. I don’t know. What is just compensation for that?"

Pinto also wonders how the mail will get to the homeowners, since presumably the address on the foreclosure forms is no longer in use. And, she says, yet another issue lies simply in the words on the page.

"I can see one sentence in here that’s in Spanish," she says, referring to the questionnaire. "And it says, 'If you speak Spanish, there is a representative who can talk to you.' But there’s no phone number! There’s no address. There’s nothing."

A 2010 report issued by the nonpartisan Center for Responsible Lending found that African-American and Latino homeowners were "76 percent and 71 percent more likely, respectively, than white borrowers to have lost their homes to foreclosure."

The report went on to assert that "African-American and Latino borrowers were particularly vulnerable, as originators targeted traditionally underserved communities for sub-prime loans and steered borrowers of color to higher-cost loans."