In recent years, mortgage servicing companies have foreclosed millions of homes in error or because of unethical processes. In 2010, government investigators uncovered problems such as banks using “robo-signers” to automatically process foreclosure documents, assembly-line fashion, that hadn’t been read.

As part of the settlement between the government and the mortgage servicers, homeowners whose homes were wrongly foreclosed in 2009 or 2010 may be eligible for payments ranging from $500 to $125,000 plus the equity they had in their homes. What they get paid would depend on the severity of mishandling regarding the foreclosure process.

Government regulators sent letters to 4.4 million people who are eligible to have their cases reviewed for possible payment. So far, about 200,000 people have requested reviews. Regulators want more homeowners to request reviews, and they have extended the deadline to make a request from July 31, 2012, to September 30, 2012.

Fourteen mortgage servicers are involved in a settlement with the Federal Reserve and the Office of the Comptroller of the Currency (OCC), including banking giants Bank of America and JP Morgan Chase. Under the settlement terms, the servicers must hire consultants to review their records, searching for foreclosure errors. The servicers must also improve their procedures, for example, by providing an easy way for borrowers to contact them.

The Fed and the OCC recently issued new guidelines to clarify what constitutes a foreclosure error and how much the servicers should pay the affected homeowners. If someone has questions about this process and the classification of foreclosure errors, he or she should contact a foreclosure attorney who can clarify the complex and important matter and guide them through the process.

Source: Reuters, “US regulators extend foreclosure review deadline,” June 22, 2012