Bob Hale nearly lost his Concord, Mass., home to foreclosure in 2010 as a result of what he claims were bank errors.
That would make him a prime candidate for the Independent Foreclosure Review, a program overseen by federal bank regulators that is designed to grant cash payouts to homeowners who prove that their loan was mismanaged during the foreclosure process.
But Hale is taking a pass. "I'm reluctant to waste my time," he wrote in a recent email exchange. "I just don't trust a word they say," he said, referring to several banks' close involvement in shaping the review process.
Hale is one of millions of borrowers who have not bothered to apply for relief through this program. So far, just 136,000, or 3 percent of qualifying borrowers, have mailed in forms requesting a loan audit, according to the Office of the Comptroller of the Currency, one of the regulators overseeing the program. Mailings to notify borrowers eligible to apply to program were first sent beginning Nov. 1, 2011.
The low application rate is yet another indication that the government's response to the foreclosure crisis might not be helping those who suffered financial harm as result of bank errors or misconduct. While it isn't possible to definitively say why borrowers aren't responding to requests to submit a case for review, several homeowners told The Huffington Post that they simply didn't believe it would do them any good.
The foreclosure review was a stipulation of consent orders that 14 loan "servicers," including Wells Fargo, Bank of America, and JPMorgan Chase, agreed to last April in a deal with federal banking regulators. The program is designed to give borrowers a chance to have their loan file reviewed by an impartial third party if their mortgage was involved in any stage of foreclosure from 2009 to 2010 and they believe that they suffered financial harm as a result of servicer errors or misconduct.
But the review program has been dogged by complaints that it is not adequately independent. Many observers have pointed out that the financial companies were permitted to choose their own auditors to review the claims.
Francine McKenna, a columnist for American Banker and a former auditor, wrote last year that the setup presents an "almost untenable conflict of interest." Many companies hired to review the loans, including Promontory Financial Group and Treliant Risk Advisors, are professional firms that directly serve the mortgage companies for other consulting assignments, McKenna said.
Federal regulators have said they have gone to great lengths to ensure that the consultants hired to review the loans would report to regulators not the banks.
The review program has also suffered from a lack of communication about how the audits will be conducted, what kind of financial harm qualifies for a payout and the tradeoffs participating homeowners will face. Indeed, many of the details of how the program works are still not clear.
The Wall Street Journal, citing anonymous sources, reported that the Office of the Comptroller of the Currency and another banking regulator, the Federal Reserve, have not agreed whether those who receive compensation from banks should relinquish their right to sue.
Regulators are currently finalizing guidelines to ensure that auditors hired by the 14 different loan servicers are evaluating the loans consistently, said Bryan Hubbard, an Office of the Comptroller of the Currency spokesman.
For his part, Hale has come to the conclusion that the whole thing is a sham. Hale, who said he obsessively follows news about the foreclosure crisis, said he has already been put through the ringer by another government program designed to help homeowners: the government's Home Affordable Modification Program or HAMP.
In 2009, after work at Hale's family-owned paving business dried up, he missed a few mortgage payments, his loan fell into default and he applied with his lender, Wells Fargo, for a mortgage modification through HAMP.
Hale claims the bank put him through "10 months of runaround hell," eventually rejecting his application for his failure to submit a tax form.
But Hale claims he sent the bank this form six different times. Married with three children, Hale wound up borrowing $50,000 from a friend to keep his house. He is now current on his mortgage payments, but his credit is trashed. Since he now makes less money, he can't get approved for a refinancing at a lower rate, he said.
Wells Fargo declined to comment on his case.
"I need to just keep up with my payments and find a way to refinance," Hale said. Going back to the bank and the government for help is not something he has much faith in, he said.
There are other possible explanations for the low response rate to the review offer. For starters, many borrowers who might have applied simply could not be reached by the government. Of the letters the Office of the Comptroller of the Currency sent to borrowers, 5.3 percent were returned as undeliverable, Hubbard said. That's a universe of borrowers much larger than the group who have applied for a review so far.
Hubbard said that the agency had tried to locate these borrowers -- an effort that included hiring skip tracers.
Other borrowers might have simply thrown the letter away. Some homeowners have complained to The Huffington Post that at first glance they thought the letter received was just another solicitation from a debt consolidation company. "I received this letter and it looked like junk mail," said Ernie Dobson, a San Diego borrower.
It isn't clear how many borrowers will ultimately apply for a review, Hubbard said, adding that the regulators have run ads paid for by the servicers in national newspapers as well as minority-focused publications and are planning to place more. The deadline to apply for a review was also recently extended three additional months -- to the end of July. It's possible that many more borrowers could apply by then.
Banks haven't commented on the reviews, but banking officials have argued throughout the crisis that reports that they mismanaged troubled home loans on a grand scale are greatly exaggerated.
This suggests another possible reason for the low response rate -- that not that many homeowners feel that they were harmed.
But given the wide scope of known loan servicing abuses, described in news reports and by government investigators, this might not be the case.
Instead, there may be many borrowers with a tale like Kelly Wright's.
In 2003, Wright and her now ex-husband bought a home worth about $400,000 in Discovery Bay, Calif., using a $100,000 down payment. When Wright lost her job of 13 years as a project manager for a homebuilder in 2009, she began to fall behind on payments. Her bank, SunTrust, eventually foreclosed on the mortgage. Wright applied for a loan modification with the help of a third-party vendor, and after months of delays, she got the welcome news that a modification was approved, she said.
But it never happened. Instead her home was sold at auction the very next day. All of her equity was lost.
A SunTrust Bank spokesman declined to comment on Wright's case.
Wright, who has spoken with The Huffington Post several times about her experiences, said she knows she probably should apply for a loan review but is worried that she lacks the documentation to back up her claims. She has moved twice since the foreclosure and divorced.
"My life fell apart and I guess I feel like getting rejected would add insult to injury," she said.