Foreclosure Review: Just 3 Percent Of Eligible Borrowers Apply For Review

Posted: 04/ 6/2012 8:43 am Updated: 04/ 6/2012 12:42 pm

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, 2010.

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 who 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.

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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.

Growth Of Suburbs Fall To Historic Low

Written by Associated Press on April 5, 2012 11:24 am

WASHINGTON — Stung by high gasoline costs, outlying suburbs that sprouted in the heady 2000s are now seeing their growth fizzle to historic lows, halting American city dwellers’ decades-long exodus to sprawling homes in distant towns.

New census estimates as of July 2011 highlight a shift in population trends following an extended housing bust and renewed spike in oil prices. Two years after the recession technically ended, and despite faint signs of a rebound, Americans again are shunning moves at record levels and staying put in big cities.

That is posing longer-term consequences for residential “exurbs” on the edge of metropolitan areas.

Construction of gleaming new schools and mega-malls built in anticipation of a continued population boom is cutting back. Spacious McMansions offering the promise of homeownership to middle-class families sit abandoned or half-built. Once an escape from urban problems, suburban regions hit by foreclosures are posting bigger jumps in poverty than cities.

The result: The annual rate of growth in American cities and surrounding urban areas has now surpassed that of exurbs for the first time in at least 20 years, spanning the modern era of sprawling suburban development.

“The heyday of exurbs may well be behind us,” Yale University economist Robert J. Shiller said. Shiller, co-creator of a Standard & Poor’s housing index, is perhaps best known for identifying the risks of a U.S. housing bubble before it actually burst in 2006-2007. Examining the current market, Shiller believes America is now at a turning point, shifting away from faraway suburbs in the long term amid persistently high gasoline prices.

Demographic changes also play a role: They include young singles increasingly delaying marriage and childbirth and thus more apt to rent and a graying population that in its golden years may prefer closer-in, walkable urban centers.

“Suburban housing prices may not recover in our lifetime,” Shiller said, calling the development of suburbs since 1950 “unusual” and enabled only by the rise of the automobile and the nation’s highway system. “With the bursting of the bubble, we may be discovering the pleasures of the city and the advantages of renting, investing our money not in a single house but in a diversified portfolio.”

The signs of longer-term bust are evident in places such as Kendall County, Ill., an outlying suburb of 116,000 people located about 50 miles southwest of Chicago. The nation’s No. 1 fastest-growing county from 2000 to 2010, Kendall was part of an exurban wave that more than doubled Kendall’s population and helped lift GOP presidential candidate George W. Bush to victory in 2004, offering Republicans the hope of a new era of conservative voters sprouting on the rural-urban edge.

By the late 2000s, however, Kendall County’s growth began to wane amid recession and rising gasoline costs. The county, like many other exurbs, eventually turned to Illinois Democrat Barack Obama in the 2008 presidential race for economic answers. By 2011, Kendall County’s annual growth had stalled further at 1 percent, dropping its county growth-rate rank to 236th.

Things were especially turbulent over the past 10 years for real estate agent George Richter, who has worked in Kendall County for more than two decades.

“New home construction couldn’t be built fast enough,” he said. “A lot of us in the industry were very, very nervous about how fast and large the annual growth rate and property value were. We knew there’s no way that something could continue on.” Now, he said, there’s little new construction.

Jeff Wehrli, a longtime Kendall County board member who runs an excavating company, said the signs of the slowdown are most apparent from devalued homes, foreclosures and a general uncertainty among residents.

“It’s going to take a while,” he said, speaking of a local recovery that he acknowledges will never reach the same levels as last decade. “Our economy has got to get back to the point where people can confidently sign off on a 40-year mortgage.”

About 10.6 million Americans reside in the nation’s exurbs, just 5 percent of the number in large metropolitan areas. That number represents annual growth of just 0.4 percent from 2010, smaller than the 0.8 percent growth rate for cities and their surrounding urban areas. It also represents the largest one-year growth drop for exurbs in at least 20 years.

By comparison, in 2006 exurban communities grew at an annual rate of 2.1 percent, compared with a population loss of 0.2 percent for inner cities.

In all, 99 of the 100 fastest-growing exurbs and outer suburbs saw slower or no growth in 2011 compared with the mid-decade housing peak – the exception being Spotsylvania County, Va., located on the outskirts of the Washington, D.C., metropolitan area, which has boomed even in the downturn. Nearly three-fourths of the top 100 outer suburban areas also saw slower growth compared with 2010, hurt by $3-a-gallon gasoline last year that has since climbed $1 higher.

Other areas showing big slowdowns are Pinal County outside Phoenix; Barrow, Paulding and Pike counties near Atlanta; Union and York counties outside Charlotte, N.C.; and Sandoval County near Albuquerque, N.M.

“The sting of this experience may very well put the damper on the long-held view among young families and new immigrants that building a home in the outer suburbs is a quick way to achieve the American dream,” said William H. Frey, a Brookings Institution demographer who analyzed the census data.

Over the past decade, the number of poor people living in the suburbs of major metro areas grew 53 percent, compared with 23 percent in cities. Suburbs were also home to roughly one-third of the nation’s poor population, outranking cities and rural areas.

The latest census data come amid an overall U.S. growth rate in 2011 of 0.9 percent, the lowest since the mid-1940s, due to fewer births and less immigration following the recent recession.

Fewer people are also moving around within the nation’s borders – just 11.6 percent of the nation’s population moved to a new home, the lowest since the government began tracking such information in 1948. That means fewer Americans are migrating to residential hot spots in the suburbs or Sun Belt metro areas such as Las Vegas, Phoenix and Atlanta, upending several of the population trends of the 2000s.

Metro areas showing renewed growth or slower losses last year included Los Angeles, Miami, Seattle and Detroit, where steep population drops in the downturn have largely bottomed out.

Other findings:

-Rural counties just beyond the edge of metropolitan areas saw growth drop sharply last year, hurt by the slowing of outward sprawl. From 2010-2011, these counties increased by 30,000 people on average, compared with annual growth of 174,000 in the 2000-2010 period, according to Kenneth Johnson, sociology professor at the University of New Hampshire.

As a whole, nonmetropolitan areas last year grew 0.1 percent, compared with 0.9 percent for large metro areas and 0.6 percent for small metropolitan areas.

-Charlton, Ga., led the nation last year as the fastest-growing county, followed by St. Bernard Parish, La., both increasing more than 10 percent. That is in contrast to the 2010 census, when St. Bernard Parish ranked last in percentage growth, due primarily to the effects of Hurricane Katrina.

-Texas had four of the nation’s fastest-growing large metropolitan areas: Austin, San Antonio, Dallas-Fort Worth and Houston.

-Los Angeles was the most populous county, with 9.9 million residents.

The census estimates used local records of births and deaths, Internal Revenue Service records of people moving within the United States and census statistics on immigrants. The estimates were for both counties and metropolitan areas, which include cities and surrounding suburbs.