This article first appeared in the St. Louis Beacon, Dec. 3, 2012 - Steven Peterson of Belleville doubts that he’ll see any cash from a government-mandated review being offered to American homeowners whose primary residences were in foreclosure in 2009 and 2010, but he filled out the application anyway and is posting online about his experience.
"I would be very surprised to receive anything. Most likely I figure I’ll get a form response telling me they did no wrong,” Peterson said.
He attached to his application a letter detailing his concerns about the lending industry, and he is encouraging other homeowners to speak out against a system that he believes “is no longer serving Americans in a fair or responsible manner.”
The program grew out of actions taken by the Office of the Comptroller of the Currency against large national bank mortgage servicers who used unsound practices -- including robo-signing documents -- in processing the flood of foreclosures after the collapse of the U.S. housing market. Homeowners who were wronged could receive compensation from their servicers ranging from $500 to $125,000, plus lost equity, as spelled out by the OCC.
The agency acted in response to bank examinations conducted in the fourth quarter of 2010 by the OCC, the Federal Reserve and the Federal Deposit Insurance Corp. (FDIC). The reviews are independent of actions taken by the nation’s state attorneys general.
Unfavorable reviews for the review process
Peterson is not alone in his skepticism of the foreclosure review program, first announced in November 2011. Consumer advocates have questioned the independence of a process that they say relies heavily on the lenders themselves.
In testimony before a U.S. Senate subcommittee, Alys Cohen of the National Consumer Law Center warned that the reviews leave too much control in the hands of mortgage servicers.
Other critics include Sheila Bair, the former chair of the FDIC, who writes about the program in her book "Bull by the Horns” and the Government Accounting Office which issued a report in June criticizing the OCC for its poor communication with eligible homeowners. The OCC extended the application from April 30, 2012, to September and then to Dec. 31.
In a report published in November, the trade newspaper American Banker detailed the costs of the reviews, which it described as "gold mines for consultants.”
"Designed to compensate wronged homeowners, the review programs are almost certain to deliver several times more cash to the consultants overseeing them,” according to the American Banker story. "Bankruptcy filings by ResCap, the former GMAC mortgage servicer slated to be acquired by Ocwen, state that the company will pay consultant PricewaterhouseCoopers $12,500 to review each of 20,000 loans for a total cost of a quarter-billion dollars. Yet ResCap expects to pay only $35 million to $60 million to harmed homeowners.”
Diane Thompson, of Counsel for the National Consumer Law Center, told the Beacon that the program would help only a narrow group of homeowners and would have looked much different if it had been designed to benefit consumers.
"It is another income stream for servicers,” she said.
Wanted: Homeowners to apply
Local nonprofits that provide free housing counseling have been trying to inform eligible homeowners about the foreclosure reviews, but it is a challenge, said Eric Madkins, who heads the St. Louis task force on foreclosure intervention. In some cases, families might have moved several times since losing their homes two or three years ago.
"The biggest challenge is accessing and actually contacting homeowners in a limited time frame,” said Madkins, a housing counseling manager at the Urban League of Metropolitan St. Louis.
Another challenge is documentation because homeowners might not have kept their records, particularly if they have relocated multiple times. If the homeowners were assisted by housing counselors, the agencies might be able to provide records, he said.
Task force members have been hearing from homeowners about the reviews, but the feedback has been low, said Madkins. He thinks the program would have benefited if testimonials were available from people who requested reviews and received compensation.
"At this point it just looks like a process, and these homeowners have already gone through an arduous process with foreclosure. They’ve gotten to the point that they’re disconnected and don’t want to go through another grueling process,” he said.
A chance to speak out
Peterson said that he received a form letter in September confirming that his request for a review has been received, but he has yet to hear anything substantive about his case.
In the letter he attached to his application form, Peterson detailed his response to instructions to describe any other way that he believes he “may have been financially injured as a result of the mortgage foreclosure process.”
Peterson wrote that his mortgage struggles began in the summer of 2009 when he was laid off from his job in Bloomington, Ill., a result of the financial crisis of 2008. Peterson eventually found a new job in O’Fallon and the family relocated, but he was unable to find a buyer for his Bloomington house. He and his wife had purchased the home in March 2003 for $144,000.
Peterson, who now rents, said that his mortgage was a conventional loan and not one of the troublesome subprime mortgages that led to the collapse of several of the nation’s largest financial giants. He made more than $92,000 in mortgage payments over the course of 6.5 years and had over $10,000 in equity in the home when he lost his job.
The house was on the market for more than a year, and Peterson said he received no offers until two weeks before the expected foreclosure date. That’s when potential buyers made a last-minute short sale offer of $126,000. After the sale closed, he received a check for $750, but lost all of his equity in the home and about $10,000 in improvements he had made to the property.
Peterson believes the process might be legal but is immoral because it allows mortgage lenders, and those who are able to purchase homes, to strip all equity from another homeowner without any consideration for "material or social cost to our culture.”
"We had to relocate in order for me to get work, and a lot of the decisions we made were based on the premise that we’d be able to get some of our money [invested in the home] back. And we didn’t. And it took 18 months for it to unfold. Since then we’ve been living on the edge of bankruptcy. Every month is a struggle. I’m spending more than I make trying to stay afloat,’’ he said.
Peterson has posted a template of a letter on his website that he hopes other homeowners will use to convey their frustrations and anger at the nation’s lending system and "shark culture” that he believes takes advantage of homeowners. He said he averages about 100 downloads of his letter every month, but no one has contacted him directly to share their opinions.
"For some, I understand it’s a difficult topic. There’s also probably a trust issue there. They’re wondering why am I doing this? I guess it’s sort of breaking some social conventions by putting this online,” he said. "Most people consider it a pretty egregious breach of their privacy, and I’m volunteering it. That may make people uncomfortable.”
