The remedies are deeply inadequate in fundamental ways. The money will too often be too little too late, particularly for borrowers who were wrongfully denied loan modifications. The federal bank regulators continue to withhold too many details from the public, when transparency would be to everyone's benefit. Further, the Sept. 31st deadline to apply for compensation for borrowers who believe they were wronged is too soon. It should be extended through year's end, especially since a large mailing was just sent out saying the deadline is July 31.
The regulators did get one thing right: They do not require borrowers who are compensated to waive their right to bring future legal actions.
Specifically:
- Borrowers who were wrongfully denied loan modifications and lost their homes will only get $15,000.
- Borrowers who wrongly did not get converted from trial to permanent modifications and lost their homes are eligible for $125,000. This raises questions about the fundamental purpose of this undertaking, which is to compensate borrowers for the financial injuries that resulted from servicer errors.
- The program lacks transparency. Regulators have not released the guidance they have given to the banks' independent consultants about how borrowers' complaints should be evaluated, raising questions about consistency among the various consultants.
- The regulators have failed to release demographics about the number of borrowers requesting reviews and have been silent on what kind of information they will release about the reviews. They should be reporting interim findings along the way.
For more information: Ginna Green at (510) 379-5513 or ginna.green@responsiblelending.org or Kathleen Day at (202) 349-1871 or kathleen.day@responsiblelending.org.