"If you faced foreclosure in 2009 or 2010, the government may have good news for you," reads new advertisements released by the federal government on Wednesday. The ads, slated to appear in more than 7,000 newspapers and 6,500 radio stations, are the latest effort to make borrowers aware of a new federal initiative that aims to help homeowners victimized by fraudulent foreclosures.
But consumer advocates reached Wednesday said the "good news" was more of a mixed bag for homeowners. For one, it's not clear that the government's message will reach a wide enough audience.
(This story has been updated to include additional information from the OCC and the National Fair Housing Alliance).
"The ads are still not very effective," said Diane Thompson, a national housing expert and attorney at the National Consumer Law Center. "They aren't being made available in languages other than English and Spanish. Even then, the [Office of the Comptroller of the Currency] is still excluding a huge number of borrowers. The original list of where the ads are being placed is very narrow. It's clear the program is not designed to reach most homeowners."
But OCC spokesman Bryan Hubbard challenged that criticism, saying "The PSAs released by the OCC today are in addition to paid advertisements that the OCC and the Federal Reserve required servicers to purchase to promote awareness of the Independent Foreclosure Review."
He added that the agency had sought much outside advice to ensure the new spots would be effective.
"The OCC ran the public service announcements by a number of consumer groups before releasing them," said Hubbard, "including National Fair Housing Alliance, National Council of La Raza, Americans for Financial Reform and the Center for Responsible Lending."
Debby Goldberg, Special Project Director at the National Fair Housing Alliance, disagrees with Hubbard's representation. "While the OCC did show us a draft of an ad just before Christmas, they failed to incorproate most of our suggestions and we in no way endorse the final version."
Though the initiative sounds promising -- qualified borrowers can request a free, independent review of their individual case -- many housing experts, consumer advocates and bank critics remain skeptical of the program's prospects. The Independent Foreclosure Reviewprogram, which is being run ran by the OCC, the government agency that supervises national banks, has come under fire by consumer advocates since it was first announced in April for being neither a truly independent or a fair remedy for those individuals who may have been wronged by some of the nation's largest banks.
The program was launched in response to April 2011 findings by federal regulators that 14 mortgage companies -- including behemoths Bank of America, Chase, Citigroup and Wells Fargo -- engaged in "unsafe and unsound" servicing and foreclosure practices, such as charging unnecessary fees, inflating mortgage balances and foreclosing during bankruptcy proceedings.
Advocates like Thompson are concerned because borrowers who choose to accept financial compensation through the program may be required to waive their right to any future claims against their mortgage company. "It's appalling that it's even on the table that the OCC is letting [banks] decide if a borrower has to waive their rights. It continues to allow [banks] to hold all the cards," said Thompson, adding that while a borrower waits to have their file reviewed, the statute of limitations could expire on a borrowers' claim, or evidence could go stale. "The entire program is designed to let the OCC shelter [banks] from liability."
Julie Williams, OCC Chief Counsel, acknowledged in her testimony at a Senate subcommittee hearing last month that there could be instances where a borrower was asked to waive their rights in exchange for compensation, but quickly added that the decision is still left to the borrower, who can choose to reject the deal. The OCC declined to comment for this article beyond Williams' testimony.
There are also concerns about the seemingly close relationship between the banks and the independent, third-party companies nominated by the banks and hired by the OCC to complete the audits. To illustrate potential conflicts of interest, New York Times' columnist Gretchen Morgenson provides the following example: JPMorgan Chase hired Deloitte to audit its files under the Independent Foreclosure Review. Deloitte audited both Washington Mutual and Bear Stearns, two large companies that collapsed during the housing crisis; Both of those financial companies were acquired by JPMorgan, meaning "any loans [those two companies] made may come under scrutiny by the same firm that audited their books," writes Morgenson.
Politicians have also noticed the potential conflict. "The only thing worse than no accountability for the banks is for regulators to create the illusion of accountability while putting no enforcement behind the efforts," said Congresswoman Maxine Waters (D-Calif.) in a letter she sent to the OCC on October 28. That letter was signed by 15 fellow members of the House, and its message was reiterated by three senate Democrats -- Robert Menedez (D-N.J.), Jeff Merkley (D-Ore.) and Jack Reed (D-R.I.) -- during the December subcommittee hearing.
Borrowers who were in any stage of foreclosure between January 1, 2009, and December 31, 2010, and whose loan was serviced by one of 14 mortgage companies have until April 30, 2012, to apply for a case review.
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