Federal regulators probing banks' alleged mishandling of foreclosures said Thursday that some homeowners might get as much as $125,000 each in remediation and would retain the right toÂ sue.
"We released a financial remediation framework today which ensures that similarly situated borrowers are treated consistently across servicers and to help borrowers considering applying for review to better understand what the potential compensation may be," saidÂ , a spokesman for theÂ , which is overseeing the Independent Foreclosure Review, along with the FederalÂ Reserve.
The detailed framework lays out a variety of remedies and gives homeowners found to have been wronged the option to ask for their house back if it has not been sold to a third party and accept a smaller sum ofÂ money.
For instance, people who successfully completed trial loan modification plans but lost their homes anyway can get $125,000 plus whatever equity they had at the time of foreclosure, or can get $15,000 and their house back when that's possible. Those options are available to people who lost their homes when they were not inÂ default.
Homeowners whose applications for loan modifications were denied in error can get $5,000 and their houses back if possible, or $15,000 plus whatever equity they may have had. People who requested a loan mod but never got the chance to apply can get $2,000; those who were never approached by their servicer to be offered a loan mod can get $1,000.
Consumer advocates said the most encouraging aspect is that people who accept compensation retain the right to pursue other remedies, such as lawsuits, but had a variety of critiques of theÂ program.
"For the category of borrowers who should have received modifications but lost their homes instead, the remedy of $15,000 seems outrageous," saidÂ , associate director of theÂ . "From a practical standpoint, that doesn't seem much different than people who were paying on their trial loan mods" who can get $125,000.
Hubbard said the distinction is that people enrolled in loan mod plans who lost their homes had contracts that the banks violated. The banks did not have a legal obligation to offer loan mods, so didn't break a promise for homeowners who didn't get a chance to be in a loan mod plan. The "vast majority" of people are more likely to have at least been in a trial loan mod plan, heÂ said.
"Most fundamentally, they haven't released the instructions about what the independent consultants are supposed to be doing," he said. "And there hasn't been any information disclosed about what those reviews have found toÂ date."
The reviews, which grew out of the robosigning controversy but are not limited to robosigning issues, cover mortgages held by the nation's largest banks that were anywhere in the foreclosure process in 2009 and 2010. Regulators previously said as many as 4.5 million households may beÂ eligible.
As of last month, 193,630 people had requested a free review and 144,817 were randomly selected for review by the consultants. Hubbard said only 11,000 reviews have been completed, and their remedies are not yet set because the framework was needed first. Regulators will provide a report after the entire process is complete, but Hubbard didn't know how long that wouldÂ take.
Critics said the response rate seemsÂ low.
"We are glad to see that they have extended the time frame," saidÂ , spokeswoman for the National Consumer Law Center in Boston. "We are glad to see that they are going to be compensating homeowners due to servicer abuses. The questions that remain are: Will this reach enough homeowners to make a difference, and will it adequately compensateÂ homeowners?"
covered by the review are: America's Servicing Co., Aurora Loan Services, Bank
of America, Beneficial, JPMorgan Chase, Citibank, CitiFinancial, CitiMortgage,
Countrywide, EMC, EverBank/Everhome Mortgage, First Horizon,
GMAC Mortgage, HFC, HSBC,Â ,
MetLife, National City, PNC,Â ,
Wachovia, Washington Mutual and WellsÂ Fargo.
CourtesyÂ of Charo Bhatt
Associate Broker at Coldwell Banker, Fremont office.
Charo can be reached at 510-381-2105 or email at CharoBhatt@gmail.com