Foreclosure Review Offers Big Payout, But Few are Asking for It

Home owners who went through a foreclosure could get up to $125,000 if their mortgage servicer made mistakes. So why are so few asking for an independent foreclosure review?

There’s a big payout waiting for some of the 4.3 million home owners (and former home owners) whose mortgage servicers made mistakes during the foreclosure process or during a mortgage loan workout.

Thanks to a settlement between 14 mortgage servicers and the federal government, a home owner who was caught up in the foreclosure wave of 2009 and 2010 could receive up to $125,000.

The six-figure checks will go to home owners who were hurt the most, but even those who were only slightly harmed could get as much as $15,000 if an independent foreclosure reviewer finds in their favor.

The catch? You have to fill out a form to ask for an independent foreclosure review of your case.

Fewer than 200,000 of those 4.3 million eligible home owners have asked the independent reviewer to look at their cases, even though the servicers were able to find about 95% of those eligible consumers.

The problem is that the average home owner can’t understand the offer, the Government Accounting Office says. Consumers didn’t respond because the website and the consumer materials were written in legalese and government-speak, and didn’t mention how the foreclosure reviewers would decide who got paid and how much they’d get. Thanks banks. (The 14 servicers mailed the inscrutable letters to borrowers who might be eligible starting late in 2011.)

Foreclosure review rules

Despite the jargon barrier, the rules for who can ask for a foreclosure review are simple. These three things tell you whether you can get your foreclosure reviewed:

  • You sent mortgage payments to one of the 14 servicers that are part of the deal.
  • Your foreclosure was started, pending, or completed between Jan. 1, 2009 and Dec. 31, 2010.
  • Your troubled loan was for your primary residence and not a vacation or second home.

If you can answer yes to those three questions, call 888-952-9105 right now and ask them to send you the form to request a free foreclosure review. Worst-case scenario: You fill out yet another form and don’t get anything for your trouble.

Who gets what from foreclosure review?

The rules about the awards aren’t so simple. There are 22 possible injuries — maybe you were offered a loan workout and made the new payments on time, but the bank foreclosed anyway; or maybe your servicer didn’t follow the special rules for active-duty military home owners. Your individual circumstances influence how much money you get.

Although the materials are hard to understand, I don’t think that’s what’s holding people back. I think it’s burnout from going back and forth with the servicers, getting calls and letters from scammers, and the stress of possibly losing your home.

Even if the whole hideous ordeal is over and you’ve moved on, it’s worth it to revisit the issue one more time. Make the call and see what happens. Maybe you’ll collect enough to start saving for your next home, or paying down the mortgage on the one you still have.