WASHINGTON (6/22/12)--Banks regulated by the Federal Reserve and the Office of the Comptroller Currency might have to pay borrowers between $500 and $125,000 if they make mistakes during the foreclosure process, according to guidelines issued Thursday by those agencies.
The guidance states that remedies may include lump-sum payments, suspension or rescission of a foreclosure, a loan modification or other loss mitigation assistance, correction of credit reports, or correction of deficiency amounts and records.
The agencies also gave a two-month extension, until Sept. 30, for eligible borrowers to request a free review of their mortgage foreclosures under the Independent Foreclosure Review.
Actions by mortgage servicers that could result in having to pay a penalty include, but are not limited to:
- Foreclosing on a borrower, in violation of the Servicemembers Civil Relief Act.
- Foreclosing on a borrower who is not in default.
- Failing to give a qualified borrower a permanent modification if they have complied with the agreement.
- Foreclosing on a borrower before the expiration of a written modified payment plan. Denying a borrower's loan modification application that should have been approved; and
- Failing to offer loan modification options as required by an applicable program.
- Giving a borrower a loan modification with a higher interest rate than should have been charged under the relevant loan modification program.
- Foreclosing on a borrower in violation of federal bankruptcy laws.
- Not providing a borrower with proper notification during the foreclosure process.
- Committing errors that did not result in foreclosure, but resulted in other financial damage.
The guidance also states that if a borrower requests a foreclosure review, he or she is not precluded from taking other actions related to their foreclosures. A servicer is not permitted to require a borrower to sign a waiver of the borrower's ability to pursue claims against the servicer in order to receive compensation under the Independent Foreclosure Review.
To read the guidelines, use the resource link.