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Our Miami bankruptcy law blog has extensively discussed how the economy and foreclosure crisis have devastated many families who have had to give up their Florida homes these past few years. To make matters worse, it was discovered last fall that many lenders and banks were following faulty foreclosure practices in order to quickly process foreclosures without proper documentation and signatures.

In response to the foreclosure malpractice, the federal government recently announced a new set of consent orders large banks and lenders must follow. The new consent orders are an attempt to fix the damage the foreclosure scandal caused for many struggling homeowners in Florida and across the entire nation. Lenders may possibly have to spend billions in order to right the flawed foreclosures.

Lenders and banks will be required by the federal government to hire consultants to review their foreclosure files. The consultants will review foreclosures that were filed, pending or repossessed between Jan. 1, 2009 and Dec. 31, 2010. If a faulty foreclosure file is discovered, the affected homeowners may be eligible to receive compensation for their financial losses. In Florida’s Palm Beach County, more than 51,000 foreclosures were filed during Jan. 1, 2009 and Dec. 31, 2010.

Although many homeowners may be reimbursed for their financial distress caused by a faulty foreclosure, the consent orders may come too late for other homeowners. One Florida couple commented that they will never be able to recover the loss of their home to a faulty foreclosure. The couple had been in the middle of negotiating a loan modification in order to prevent their house from going into foreclosure. However, the bank sold the couple’s home at a foreclosure auction.

The couple was ordered out of the home that they had lived in for almost 20 years. They moved on and signed a one-year lease for an apartment, but two months later the couple’s lender notified them that they had been approved for the mortgage modification. Because the couple had already signed a lease for a new apartment, the couple had to turn down the lender’s late offer.

Source

The Palm Beach Post: “Fixing flawed foreclosures could cost lenders billions,” Kimberly Miller, 15 Apr. 2011