Federal regulators extended the deadline for a wide-scale foreclosure review and detailed how much will be paid to borrowers for any abuses discovered.
Under the consent orders signed with 14 mortgage servicers in April 2011, third-party consultants began reviewing a sample of foreclosure filings completed in 2009 or 2010 to detect any financial injury caused. Any borrower can request their file be reviewed but must apply with their servicer by Sept. 30, a two-month extension announced by the Officer of the Comptroller of the Currency and the Federal Reserve Thursday.
The consultants selected 144,817 files in the servicer portfolios for review, and 193,639 borrowers requested a free review as of May 31, according to the OCC.
The reviews were originally expected to cover as many as 4.5 million loan files. This is the second extension from the original April 30 deadline.
"I hope borrowers who believe they suffered financial injury from foreclosure errors will take advantage of the additional time provided by the September 30 deadline to apply for a free review through the Independent Foreclosure Review," said Comptroller of the Currency Thomas Curry in a statement. "Reviews will be conducted in a fair and impartial manner."
For the first time, regulators also released Thursday how financial injury will be compensated and what correction will be taken. Payments vary based on whether the fraudulent foreclosure was completed or still in the process. (For a complete list of the possible damages, click here.)
If a servicer wrongfully foreclosed on a borrower who was not in default, the foreclosure must be rescinded and $15,000 must be paid to the borrower.
If the repossession already took place, and the property was resold, the servicer must pay the borrower $125,000 plus any equity lost in the home and correct the credit report to reflect no foreclosure was taken.
Servicers continually claim that no borrowers lost their home as a result of the robo-signing scandal if they were current on their payments.
But other injury could have been done.
If it's discovered a borrower was foreclosed on as a result of a failure to correctly convert a trial-period modification into a permanent workout, the servicer must pay the borrower $5,000 if they are still in the foreclosure process, cancel any late fees and provide a permanent modification. If the permanent modification cannot be given, the borrower will receive $35,000.
If the foreclosure was completed on a borrower because of a modification mistake, the servicer must pay the same penalties to the borrower as if he or she never defaulted on the loan in the first place – meaning the borrower could still get $125,000 plus equity.
Borrowers can also expect smaller payouts for less harm. For instance, if a servicer never officered a modification or never followed up one the borrower sent, the borrower could get $2,000 if wrongfully placed into foreclosure.
Other payouts, such as wrongfully forcing the borrower into bankruptcy or failing to provide sufficient notice to foreclosure, will be decided on a case-by-case basis.
Under the consent orders, servicers are required to install new standards to handle troubled mortgages, including single-point of contacts and ending the practice of foreclosing on borrower while being considered for a modification.
Servicers completed 93% of the corrective actions through May 24, according to the OCC.