It's been more than six months since government regulators and banks first extended an offer to 4.3 million homeowners facing foreclosure: to review, at no cost, the foreclosure process to check for any possible errors or misrepresentations.
Homeowners stand to collect compensation of as much as $100,000 if errors are found. But thus far, only a tiny percentage of those eligible have signed up.
'Not Enough Folks Have Signed Up'
The push for a review process was set in motion by the "robo-signing" scandal. In 2010, several banks admitted mishandling some foreclosure documents. Some borrowers may have wrongfully lost their homes as a result, and the scandal exposed systemic problems in the foreclosure process.
In the wake of the scandal, federal bank regulators required 14 mortgage companies to establish the Independent Foreclosure Review process.
The review costs homeowners nothing, but at last count, only 165,000 people — fewer than 4 percent of those eligible — have applied.
The original April 30 deadline has since been extended to July 31.
Last month, Housing and Urban Development Secretary Shaun Donovan tried enlisting a group of housing counselors to get more homeowners to sign up for the review.
"I am concerned that not enough folks have signed up, and that we're going to waste that opportunity," Donovan said.
Donovan says the process presents the first real opportunity for most troubled homeowners to get an independent read on whether their case was — or is — being handled appropriately.
Fraught With Complications
John Taylor, CEO of the homeowners advocacy group the National Community Reinvestment Coalition, says it's no surprise consumers haven't responded in droves.
"Consumers are tired of listening to folks who are promising them they'll help them, and all they do is charge fees," Taylor says. "There are tons of scammers out there."
Like so many other things having to do with foreclosures, Taylor says the Independent Foreclosure Review program is fraught with challenges and complications.
He says most borrowers avoid direct mail, and many no longer even live at their old address. In addition, Taylor says the official program website, which bears no official government logos, looks untrustworthy.
And, he says, it took the banks more than six months to send the letters to those who qualified — giving homeowners less time to respond.
"It doesn't really connote a genuine commitment to really helping the amount of people who could have been, and may have been, abused in this process," Taylor says.
"The response rate is really not our focus," says Bryan Hubbard, spokesman for the Office of the Comptroller of the Currency, one of the federal agencies administering the program. The government, he says, cannot force people to take advantage of the program.
"It's always a risk that people will ignore mailings," Hubbard says. "But that's one of the reasons we required advertising. It's one of the reasons we're doing public service announcements, and it's one of the reasons we're doing [media] interviews."
The marketing effort, paid for by the banks, includes three rounds of print advertising in different languages. Separately, the government has run public service announcements in small publications and on 6,500 radio stations around the country.
Restitution Guidelines Forthcoming
Hubbard says some homeowners' cases may be reviewed, even if they don't apply. A sampling of foreclosure cases are being pulled from the banks' records to be scanned for mistakes.
Paul Leonard, a senior vice president at the Financial Services Roundtable, which represents the participating lenders, says cynics may think the banks have little incentive to get the word out, but says that's simply not the case.
"Virtually everyone involved in this wants to do it right," he says.
In the coming weeks, regulators will release guidelines for how much homeowners with legitimate grievances should receive in compensation.
Restitution payments will range from several hundred dollars to more than $100,000 for the gravest errors. The funds are separate from the $25 billion national bank settlement announced earlier this year.