Our FAQ on The National Foreclosure Settlement and Independent Foreclosure Review

Update: On Jan. 7, 2013, banking regulators announced the Independent Foreclosure Review would end for 10 banks and be replaced by a $3.3 billion settlement. See our report for the initial rundown. We will update this FAQ when the settlement is finalized and the details are available.

Update: This post was revised Oct. 1, 2012, to include information about the mailing of claim forms to homeowners eligible for the National Mortgage Settlement.

The government is overseeing two large, interrelated efforts to compensate homeowners who were harmed during the foreclosure crisis: the National Foreclosure Settlement and the Independent Foreclosure Review. Below is our FAQ to explain who is eligible for these programs and how people can apply. If you have other questions, let us know, and we will consider adding them to this FAQ.

Also, to help us continue monitoring these programs, homeowners going through them can fill out our foreclosure questionnaire and email us to tell us what's happening.

The National Foreclosure Settlement

In February 2012, officials from 49 states and the federal government announced they'd struck a $25 billion deal with five of the country's biggest banks. The settlement resolved allegations that the banks deceived homeowners and broke laws when pursuing foreclosure.

About $1.5 billion of that $25 billion actually constitutes cash that's going straight to victims of the banks' practices. The process is underway.

Q. Who is eligible for this compensation?

1. You were foreclosed on between Jan. 1, 2008 and Dec. 31, 2011. Unlike the Independent Foreclosure Review (see below), the settlement limits compensation to those who actually lost their home to foreclosure.

2. The home was or was intended to be your primary residence when you got the mortgage loan.

3. Your mortgage servicer — the company you sent payments to — was one of a select number of companies. The government has not yet posted an official list, but five banks are participating in the settlement. The following companies are servicing subsidiaries of those banks, so you are likely to fulfill this criterion if your servicer is one of these companies:

America's Servicing Co.
BAC Home Loans Servicing (a subsidiary of Bank of America)
Bank of America
Chase
Citibank
CitiMortgage
Countrywide
EMC Mortgage
GMAC Mortgage
Home Loan Services (a subsidiary of Bank of America)
Washington Mutual (WaMu)
Wells Fargo Bank
Wilshire Credit (a subsidiary of Bank of America)

4. Your house was in Washington, D.C., or any of the U.S. states except Oklahoma. (If you're an Oklahoman, see this.)

5. You lost your home due to a financial hardship and/or you were improperly foreclosed on.

Q. What kind of financial hardship? What does "improperly foreclosed on" mean?

This website, set up to allow homeowners to file claims online, lists several examples of financial hardships.

The site also lists two main categories of improper foreclosure: "loan modification problems" and "foreclosure errors." Both categories contain several examples.

Q. Do I have to prove I had a financial hardship or I was improperly foreclosed on?

No, you will just have to check a box.

Q. How much compensation might I receive?

It depends on how many people claim their compensation. Everyone will receive the same amount regardless of the nature or severity of the servicing abuse. At the least, homeowners will receive $840, but it will almost certainly be more than that. Officials overseeing the settlement have estimated that eligible borrowers will receive about $2,000 each, which is based on the assumption that 750,000 borrowers will claim compensation. If more borrowers respond, it could be less than $2,000, and if fewer borrowers respond, it could be more.

Q. Who's in charge of this process?

The state and federal officials overseeing the process have appointed a company to be the "Settlement Administrator": Rust Consulting. You can call Rust with questions at 1-866-430-8358.

Q. How do I apply?

There's no application process. Rust Consulting will identify the eligible borrowers and send notices out to them.

Q. What do I do then if I think I'm eligible?

You can contact Rust Consulting at 1-866-430-8358 if you think you should have received a notice and claim form, but did not.

Q. When will this process get underway? When should I expect to look for something in the mail? When will I get my payment?

Notice letters and claim forms are being sent to eligible borrowers from late September through early October 2012.

A spokesman for the Iowa attorney general’s office, which led the settlement negotiations, said checks should go out to borrowers by the middle of 2013.

Q. What should I look for in the mail?

The letters will include a "National Mortgage Settlement Claim Form" and will also have the letterhead and/or logo of your state attorney general.

Here is an example of the letter and form being sent to homeowners in Florida.

Q. Will I have to waive my right to sue my servicer in exchange for receiving this compensation?

No. But if you sue your servicer, this compensation would offset any money you might receive through the lawsuit. For example, if you won $10,000 through a lawsuit, but were given $2,000 in compensation through the National Foreclosure Settlement, you would receive only $8,000 from the suit.

The Independent Foreclosure Review

In November 2011, federal banking regulators launched the "Independent Foreclosure Review." Certain current or former homeowners who were the victims of abuses or errors by mortgage servicers will be eligible for compensation.

Q. Who is eligible for the reviews?

You have to meet all of the following criteria:

1. The home is/was your primary residence. Vacation homes or investment properties will not be eligible.

2. You were in the foreclosure process at any time between Jan. 1, 2009, and Dec. 31, 2010. The review is NOT limited to people who actually lost their homes to foreclosure in that time period. All that matters is that you were in foreclosure at any point during that time frame. You might have eventually avoided foreclosure by getting a modification; you might still be in foreclosure; you might have sold your home. The final outcome doesn't matter. All that matters is that you were in the foreclosure process at some point in 2009 or 2010.

3. Your mortgage servicer — the company you sent payments to and that handled your request for a modification — in 2009 or 2010 was one of the following companies, listed here in alphabetical order:

America's Servicing Co.
Aurora Loan Services
BAC Home Loans Servicing (a subsidiary of Bank of America)
Bank of America
Beneficial
Chase
Citibank
CitiFinancial
CitiMortgage
Countrywide
EMC Mortgage
EverBank/Everhome Mortgage
GMAC Mortgage
HFC (now HFC Beneficial)
Home Loan Services (a subsidiary of Bank of America)
HSBC
IndyMac Mortgage Services (part of OneWest Bank)
Litton Loan Servicing*
MetLife Bank
National City Mortgage
PNC Mortgage
Saxon Mortgage Services*
Sovereign Bank
SunTrust Mortgage
U.S. Bank
Wachovia Mortgage
Washington Mutual (WaMu)
Wells Fargo Bank
Wilshire Credit (a subsidiary of Bank of America)

*Regulators acted on Litton Loan Servicing and Saxon Mortgage Services later than on the others, so the foreclosure review for Litton and Saxon customers has not yet begun. The Federal Reserve — the regulator for both Goldman Sachs, which owned Litton during the relevant time period, and Morgan Stanley, which owned Saxon — could not tell us when the process would begin for either company. We will update this post when we hear more about this.

Q. Who is conducting these reviews?

Under the supervision of regulators, the servicers have hired consultants to conduct the reviews. While some critics see a conflict of interest in the servicers choosing who will review their conduct, regulators say the consultants will be independent and answer to them, not to the servicers.

On Nov. 22, 2011, the Office of the Comptroller of the Currency (OCC) released a list showing the consultants and which banks they'll be reviewing. They also released each consultant's "engagement letter," which lays out the terms of their agreements. Below is the list of banks and their consultants. We've also uploaded the engagement letters, which you can see by clicking on the consultants' names.

Aurora Loan Services: (See note below.)
Bank of America (includes BAC, Countrywide, Home Loan Services, and Wilshire): Promontory Financial Group, LLC
Chase (includes EMC and WaMu): Deloitte & Touche, LLP
CitiBank (includes CitiMortgage and CitiFinancial): PricewaterhouseCoopers, LLP
EverBank/Everhome Mortgage: Clayton Services, LLC
GMAC: PricewaterhouseCoopers, LLP
HSBC (includes HFC and Beneficial): Ernst & Young, LLP
IndyMac Mortgage Services (part of OneWest Bank): Navigant Consulting, Inc.
MetLife Bank: Ernst & Young, LLP
PNC Mortgage (includes National City): Promontory Financial Group, LLC
Sovereign Bank: Treliant Risk Advisors, LLC
SunTrust: PricewaterhouseCoopers, LLP
U.S. Bank: PricewaterhouseCoopers, LLP
Wells Fargo Bank (includes America's Servicing Co. and Wachovia): Promontory Financial Group, LLC

Note: The OCC announced on May 11, 2012 that the consultant handling Aurora's review, Allonhill, had been removed, because it was not sufficiently independent: Allonhill had earlier provided advisory services related to the same pool of loans it was reviewing for abuses and errors, the OCC said. Aurora is in the process of selecting a new consultant, according to OCC spokesman Bryan Hubbard.

Q. How do I submit a complaint so that I'm included in this process?

You have to submit a Request for Review Form postmarked no later than December 31, 2012. (The original deadline of April 30, 2012 was extended to July 31, then through September, and then again.)

You can get a hard copy of the Request for Review Form two different ways. First, you might have received a letter from your servicer with the form included. Those letters were mailed out sometime before the end of 2011. If for some reason you haven't received one, you can also request a form by calling 1-888-952-9105 (Monday through Friday, 8 a.m. to 10 p.m. or Saturday, 8 a.m. to 5 p.m. Eastern time). The form will have a "control number" specific to your individual case.

You can also submit your application through the Independent Foreclosure Review website.

You can see a sample version of this form here so you'll know what it looks like. It was mailed to homeowners with something like this notice. But again, you need to obtain a form that's specific to your request.

Q. What abuses or errors are covered by this review?

There is no comprehensive list, but regulators have indicated some clear areas of focus. If any of the following abuses happened to you, you will probably have a better shot at receiving some form of compensation if you clearly describe them on the Request for Review Form and provide any supporting documentation. (For a longer list, including some less common situations, see this congressional testimony from an OCC official.)

Modifications:

Your servicer didn't properly consider you for a modification — that includes not following the guidelines of HAMP, the Home Affordable Modification Program.
You were in a trial modification, were making payments, but were foreclosed on anyway without having been denied a permanent modification.
You were doing everything a permanent modification agreement required, but the foreclosure sale still happened.
You requested assistance/modification, submitted complete documents on time, and were waiting for a decision when the foreclosure sale occurred.

Calculation errors or incorrect charges:

You were charged bogus fees and/or penalties.
Mortgage payments were inaccurately calculated, processed or applied. It would be especially noteworthy if the foreclosure process began because your servicer incorrectly processed your payments.
The mortgage balance amount at the time of the foreclosure action was more than you actually owed.

Legal and documentation issues:

Your servicer didn't properly document ownership of the promissory note or mortgage when the foreclosure was initiated.
Your servicer didn't follow state or federal laws when it pursued foreclosure. (For example: the servicer might not have sent you the proper notices or not waited the required amount of time before initiating foreclosure or actually foreclosing).
You were not actually in default when your servicer initiated foreclosure.

Other:

The foreclosure action occurred while you were protected by bankruptcy.
Your servicer violated the Servicemembers Civil Relief Act. For instance, you were in the military and on active duty when your servicer pursued foreclosure. Under the act, the ban on foreclosure runs for nine months following active duty.
You sent a payment sufficient to cure your default, but your servicer didn't accept it.

Q. What sort of compensation might I receive?

You could receive up to $125,000 or nothing at all. It depends on what your servicer did wrong and whether you suffered “financial injury” as a result.

In June of 2012, regulators released a basic “framework” that shows the compensation for a number of common servicer abuses. You can see it here.

Some abuses have been set at a precise dollar figure. In those cases, regardless of the size of the mortgage or the homeowner’s individual circumstances, the compensation is the same. For example, the highest possible amount someone who lost their home to foreclosure could receive is $125,000 (plus whatever equity was in the foreclosed home), but that’s only under four scenarios:

- The servicer broke the law by foreclosing on a member of the military protected by the Servicemembers Civil Relief Act.

- The servicer foreclosed even though the homeowner wasn’t actually behind on payments or was only behind as a direct result of the servicer’s error.

- The servicer foreclosed even though the homeowner hadn’t yet completed the trial modification and was making payments.

- The servicer foreclosed even though the homeowner had successfully completed a trial modification, but hadn’t yet been given a final answer on a permanent modification.

In all those scenarios, the borrower receives the $125,000 if the servicer can’t unwind the foreclosure. If the servicer rescinds the foreclosure and returns the home to the borrower, the cash compensation drops to $15,000. (See here for more info on when the servicer is required to undo the foreclosure.)

All other abuses bring less compensation. For instance, if the servicer foreclosed after denying a modification application that should have been approved, that brings $15,000 ($5,000 if the servicer gives the home back to the borrower). And sometimes, there’s no universal figure – the compensation will be tailored to the homeowner’s precise situation. In some cases, the servicer may just be forced to correct its errors and not provide any cash compensation at all.

Regulators say people will not be compensated for pain and suffering they endured as a result of the servicer’s abuses, such as stress or depression, because the review focuses solely on “financial injury” done to the borrower. Regulators also say that victims won’t be separately refunded for attorney costs incurred fighting the foreclosure.

The framework for compensation lists 13 different scenarios, and regulators have produced a lengthy FAQ about it, so homeowners should take a look at those documents for more information.

Q. What will happen after I submit my complaint?

You should receive an acknowledgment letter within one week. Then you wait. The reviewer may contact you for more information at some point. You will not be interviewed, however. Eventually, you will receive a letter that lays out what compensation you are being offered and "the findings of the review." Regulators said they haven't decided precisely what form these letters will take and in what detail they will discuss your complaint.

Q. Will submitting my complaint automatically stop my foreclosure?

No. However, the OCC says that homeowners who submit a request for review "will receive expedited attention" if the servicer is about to sell their home through foreclosure. Essentially, the reviewer will investigate to see whether the servicer committed any abuses or errors. If so, the foreclosure sale "may be postponed or halted." That is far from a guarantee.

Q. How long will the review take?

Regulators won't say. We will update this FAQ when they give some indication.

Q. Will I have to waive my right to sue my servicer in exchange for receiving this compensation?

No.

Q. Can I appeal if I disagree with the findings of the review?

No.

Correction, June 7: This post has been updated to reflect the fact that homeowners can submit their application for the Independent Foreclosure Review online. It's also been updated to clarify that homeowners eligible for the review will only be receiving a reminder through the mail this summer, not another copy of the request for review form.