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Foreclosure Reviews Begin For Tainted Mortgages
Some Borrowers Will Give Up Future
Claims In Foreclosure Reviews

Mortgage servicers might get a break from future litigation under the new foreclosure review
guidelines. The waiver of claims will depend largely on the type of settlement the homeowner
accepts if the foreclosure review determines that there were substantial errors in the
mortgage, or outright fraud on the part of the lender or servicer.

The Office of the Comptroller of the Currency (OCC) and the Federal Reserve have approved
independent consultants to review almost 4.5 million files. They will be looking for errors in the
mortgage documents that caused harm to the homeowners, resulting in foreclosure.

The biggest challenge facing the OCC and the Federal Reserve is designing a system of
payments to homeowners who were wrongfully foreclosed on. Another issue will be deciding if
a full waiver of claims is warranted.

If the house is still available, the property can be returned to the homeowner, plus an amount
can be given to cover all expenses and pain and suffering. The expenses will be easy to figure
out. There will be an obvious paper trail, going back to the pass due notices, the late fees and
penalties. The more difficult calculation will be the costs of pain and suffering.

A mailing campaign began on November 1st. Homeowners who went through the foreclosure
process in 2009 and 2010 will be eligible to apply by April 2012.

Some financial experts are raising questions about the whole process of the review. Are the
independent consultants really independent? The OCC has assured the lawmakers in
Washington that the letters of engagement have been examined carefully, and that all dealings
are above board. For the program to succeed it has to be fair and transparent.

The independent consultants retained by each servicer to conduct these reviews of
national banks and federal savings associations are:

• AllonHill, LLC, for Aurora Bank;
• Clayton Services, LLC, for EverBank;
• Deloitte & Touche, LLP, for JPMorgan Chase;
• Ernst & Young, LLP, for HSBC and MetLife Bank;
• Navigant Consulting, Inc., for OneWest;
• PricewaterhouseCoopers, LLC, for Citibank and U.S. Bank;
• Promontory Financial Group, LLC, for Bank of America, PNC, and Wells Fargo
Bank; and
• Treliant Risk Advisors, LLC, for Sovereign Bank.

Another issue the experts are looking at is the total cost of the program. Some estimates put
the figure at $11 billion, based on about $2,500 per loan file.

The proof of the success of the foreclosure review program will be the number of homeowners
who received help and how much money they got for all their troubles.