Bank regulators and the mortgage industry have launched a complaint process to reach out to more than 4 million homeowners to find and compensate any who were harmed by deficiencies in banks’ foreclosure operations.

Bank regulators in April ordered 14 large mortgage servicing firms to fix problems in their foreclosure-handling processes. The Office of the Comptroller of the Currency and Federal Reserve required these companies to hire independent consultants to fix those problems. The industry has now started sending letters to around 4.5 million borrowers who were in some stage of foreclosure in 2009 or 2010.

Consumers who want to have their foreclosure cases reviewed must submit their information by April 30, though it remained unclear how much they will be compensated, or whether they would be required to waive their right to sue their mortgage company to receive compensation.

The regulators and mortgage servicers have also launched a toll free number 1-888-952-9105 and a website.

The affected mortgage servicers include the nation’s largest banks, such as Bank of America Corp., Wells Fargo & Co., J.P. Morgan Chase & Co. and Citigroup Inc.

The review process announced Tuesday is one of several efforts to address revelations that surfaced a year ago over banks’ use of so-called robo-signers, bank employees who signed off on huge numbers of legal foreclosure filings daily and falsely claimed to have personally reviewed each case.

Banking industry officials insist that the review is likely to find few borrowers who were harmed financially. But regulators outlined several kinds of errors that could have impacted borrowers and require compensation.

Those include: homeowners who lost their homes to foreclosure even though they were protected by bankruptcy court, borrowers who were charged improper fees or those who lost their homes even though they were in the process of getting a loan modification to lower their monthly payments.

Regulators are also seeking to find cases in which active-duty members of the military were thrust into foreclosure in violation of a federal law that bans such actions.

Democrats on Capitol Hill and consumer advocates have questioned the regulators’ decision to allow banks to hire their own consultants to conduct foreclosure reviews. Rep. Maxine Waters (D. Calif.) said regulators are “putting the banks in the driver’s seat” in finding and compensating consumers harmed by shoddy foreclosure practices.

“They’re allowing servicers to hire entry-level employees to make complex legal determinations on whether foreclosures were in accordance with state and federal law,” she said in a statement Tuesday.

In response, regulators said they went to great lengths to ensure that the consultants, who they didn’t identify, aren’t influenced by the mortgage industry. “This will be an impartial review, it will be an independent review,” said Joe Evers, the OCC’s deputy comptroller for large banks.

These consultants will be asked to sort out the facts of foreclosure cases, in which borrowers and mortgage servicers often have a competing version of events. Borrowers won’t automatically be interviewed, though the consultants can contact them for questions, officials said.

The consultants will be asked to weigh information submitted by borrowers and by mortgage servicers. “Between the two sets of information, they should be able to determine whether there is financial injury or harm,” Evers said.

The consultants, in addition to receiving complaints from borrowers, will also review a sample of cases for errors at each mortgage servicer.

Banks are also negotiating with state attorneys general and federal regulators to settle an investigation into the foreclosure practices. A proposal on the table now puts a $25 billion value on a settlement by the nation’s five largest mortgage servicing companies, the Wall Street Journal reported Tuesday.

Banks and government officials have been negotiating for months over a pact in which the banks would pay to settle some legal claims, but it’s still not clear that a deal will be reached.

Carlos Marroquin, no2housingcrime.org