11/22/2011 10:37 am ET Updated Jan 22, 2012

Independent Foreclosure Review: Is It the Real Deal?

On November 1, 2011, the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency began a new initiative, requiring a review by an independent consultant to determine if errors or misrepresentations made by banks might have caused financial harm to homeowners.

Is this the real deal? I've assisted thousands of homeowners who are facing foreclosure, and I have personally witnessed untold amounts of bank errors, misrepresentations, miscalculations, and even unfamiliarity with the foreclosure process. Each of these has, no doubt, resulted in some measure of financial injury or harm to the homeowner, whether they received a loan modification and saved their home or lost their home to foreclosure.

If it's the real deal, it's huge. Four and a half million homeowners could be affected, as long as their mortgage was serviced by one of the 14 largest services (named below). Other criteria requires that the house was the homeowner's primary residence and that the foreclosure took place between January 1, 2009, and December 31, 2010. The government said that they've already begun sending out notification letters to potentially eligible homeowners -- that process is to be completed by December 31, 2011.

If you receive a notification that your foreclosure fits the initial criteria for an independent review, you must complete and return a Request for Review Form, which must be postmarked no later than April 30, 2012.

While I applaud the efforts to recognize that banks do err, resulting in great financial injury and the loss of a home to its customers, I also welcome these efforts with an ounce of caution. Simply put, I've learned that even the best intentions, coupled with stringent guidelines and government bureaucracy, can create additional problems. As I've said many times before, question authority.

If you believe you meet the eligibility requirements and were financially injured due to a wrongful foreclosure or bank error, misrepresentation, etc., that resulted in foreclosure, it's important that you follow the guidelines in your notification letter. But be aware of the potential for several problems:

1. You don't receive a notification letter, even though your loan was serviced by one of the 14 servicers subject to review. (In this case, you can call 1-888-952-9105 or visit to find out if you should have been included.)

2. If you don't receive a letter, question why not. The addresses provided to the government for potentially eligible homeowners are provided by none other than their lenders. Does your lender know your current address, or are they sending your notification to your last-known address... the address for the home which was foreclosed on? Again, question authority.

3. If you don't receive a letter, what criteria and parameters are being used? Does the government have the final determination over who receives an independent foreclosure review, or does the lender? Whose figures will they use in determining error or financial loss? These questions alone prompt further investigation.

4. I should point out that the independent foreclosure reviews are not being done by the government -- the government is only requiring them to be completed. So who is performing the reviews? "Independent" reviewers who are hired by your mortgage servicer will be reviewing your foreclosure to see if the bank who hired them made a mistake. This raises red flags and the potential for possible conflicts of interest and bias on the part of the reviewer.

5. As with any government incentive, too little is known about the independent foreclosure review process. There is only a smattering of examples of what and who qualifies, with very little offered to define "financial injury" or how people will be compensated for it. While some may get nothing, others may get a mere few dollars for overpayment of fees. Will those who are entitled to larger compensations be justly awarded the full amount of the loss they suffered due to bank error? After all, these are the same banks that made the mistake in the first place -- the possibility for more mistakes certainly exists today. And what about those who suffered the greatest loss -- the loss of their home? How will they be compensated?

6. Among the foreclosed homeowners who will receive financial compensation for their losses, how and when will they be paid? How long does the process take, and will it be fair to all involved?

While I agree wholeheartedly with an independent review of foreclosures in an effort to right the wrongs that may have been committed by lenders, I also am skeptical. There are too many gray areas which can affect homeowners, and I can see room for even more error. This might be the real deal, but it might also require diligence, perseverance, and a little determination and sweat equity on your part to find out if it is. You, not the government, the bank, or an independent reviewer, will always be your own best advocate. Trust no one, do your own homework and research and question authority.

*The 14 lenders subject to the independent foreclosure review regulation are (in alphabetical order): Ally's GMAC Mortgage, Aurora Bank, Bank of America, Citibank, EverBank, HSBC, JPMorgan Chase, MetLife, OneWest, PNC, Sovereign Bank, SunTrust, U.S. Bank, and Wells Fargo.  If you believe that you are eligible for an independent review, visit the government's website at or call 1-888-952-9105. Make sure you receive a letter and a request for a review and follow the guidelines and timelines as stated.