Will Homeowners Benefit from Mortgage Mess Settlement?

Will homeowners see a penny of the reimbursements that the government has ordered 16 mortgage lenders to pay? Not likely, foreclosure victims and housing activists say.

Under a settlement between regulators and banks announced on Wednesday, an independent review will be conducted of all foreclosures that took place in 2009 and 2010 to determine whether fees were improperly charged or homes were wrongfully foreclosed upon.

Kathleen Keest at the Center for Responsible Lending says whether or not homeowners see any money from the banks is contingent on the outcome of the review.

"It all depends on what the independent consultant looks for, how well it does its job, what standards it uses to evaluate those questions, and what it finds," Keest says. The investigators are to be named by the banks, subject to approval from the Office of the Comptroller of the Currency.

Lisa Epstein, a homeowner-rights activist and founder of ForeclosureHamlet.org, a social network of more than 3,000 distressed homeowners, is skeptical that the review will be substantial or truly independent.

"They came out with weak, conciliatory try-to-do-it-better consent agreement that offers no hardcore investigation," Epstein says. "It's trying to sweep up the confetti while the parade is still happening."

She says a thorough investigation needs to examine both the borrowers' records and the servicers' records. "There can be two different stories," she says. "A lot of people may look delinquent for the servicer, but they have records of payment."

'How Many Times Can You Be Outraged?'

One such borrower is Nicole West, a homeowner in Jensen Beach, Fla., who has been fighting a foreclosure on the home where she has lived with her husband and two children since the early 2000s. Their four-year-long saga has been highlighted by Rep. Alan Grayson (D-Fla.).

She says she has Western Union records of more than $43,000 made in wire payments to her mortgage servicer in 2007 in an effort to get current on her loan. West claims that the money was never applied to her debt. She concurrently tried for a loan modification, but her property was placed under threat of foreclosure, she says. That practice is called dual-tracking. West is currently working with a lawyer to fight the foreclosure proceedings on her home and expose the fraudulent procedures.

West called Wednesday's settlement a poor excuse of a solution and a slap on the wrist for the banks. "There is a phrase called 'outrage fatigue,' because how many times can you be outraged before you are done?"

Alys Cohen of the National Consumer Law Center is concerned that the settlement is step backwards with regard to dual-track problems like those West has experienced. Cohen says the settlement ruling stops short, and prevents only the sale of the property as a foreclosure, but it doesn't stop the loan servicing company from starting the foreclosure process. For homeowners awaiting loan modification approval, she says, that's confusing, and leaves the door open for potential wrongful sales.

What About the Land Records?

Included in the settlement was a cease-and-desist order against Mortgage Electronic Record Systems or MERS, a privately held company that operates an electronic registry system designed to track mortgage ownership and rights of mortgaged properties.

John O'Brien, who has served as the register of deeds for Essex County, Mass., since 1977, is vocal about the flaws with MERS. He says the settlement action is a step in the right direction, but doesn't address the millions of dollars in lost revenue for counties and states and the ongoing confusion over titles for millions of properties.

"I was encouraged that they ordered a cease and desist for MERS, but I am also cautious and want to also make sure that this isn't swept under rug," O'Brien says. "We have been recording property titles since the 1700s. We know what we are doing. Meanwhile, they have sold people's mortgages time and time again."

In Guilford County, N.C., the sentiment was echoed by country Register of Deed Jeff Thigpen, who has also been outspoken about problems with MERS. He says Wednesday's settlement is only a drop in the bucket to get things back in order for homeowners.

"I am little skeptical that this is a strong message. The banks sounded like, 'Oh you hit me on the arm. I'm hurting now.' It's just play-acting," he says. "This is not really getting at the gravity at the billions and trillions of dollars lost and the pain and suffering of not knowing who owns what."

Catherine New is a personal and consumer finance reporter for DailyFinance.com and Aol Huffington Post.