Federal regulators recently directed 14 major mortgage servicers to mail letters to 4.3 million customers who could be potential victims of fraudulent foreclosure practices. The letters stipulate that homeowners whose houses were foreclosed on in 2009 or 2010 will be eligible for a free review of their cases by a lender-funded independent consultant.  The action stems from revelations last year that banks made widespread and possibly intentional errors on foreclosure paperwork that could have caused financial harm to millions of borrowers – the so-called “robo-signing” scandal.

If reviewers find that homeowners were harmed financially, the borrowers may be allowed compensation. The Servicers participating in the program are: America's Servicing Co., Aurora Loan Services, Bank of America, Beneficial, Chase, Citibank, CitiFinancial, CitiMortgage, Countrywide, EMC, EverBank/Everhome Mortgage, First Horizon, GMAC Mortgage, HFC, HSBC, IndyMac, MetLife, National City, PNC, Sovereign Bank, SunTrust Mortgage, U.S. Bank, Wachovia, Washington Mutual and Wells Fargo.

The comptroller's office hasn't provided many details on the effort. Spokesman Bryan Hubbard did say that the yet-to-be-named reviewers will be looking for "errors, misrepresentations or deficiencies in the foreclosure process.”

As far as what form remediation would take, Hubbard said that monetary compensation was possible but refused to speculate on amounts. There is no upper limit on the amount financially harmed borrowers can collect, he added.

What is not clear is whether banks participating in the federal outreach program would be released from further claims that victims of fraud might have if said victims won compensation through the remediation process. It is this issue which compelled California Attorney General Kamala Harris to walk out of multi-state settlement talks with lenders in a separate robo-signing suit early last month.

In that case, several state Attorney Generals, led by Iowa Atty. Gen. Tom Miller, together sued the nation's largest loan servicers citing fraudulent documentation submitted to courts and in some cases a lack of standing to foreclose. States and federal agencies initially worked out a $20 billion deal with commercial lenders to allow loan modifications in the form of principle reductions for underwater homeowners.

When asked why she opposed the proposal, Harris said that the states were being too lenient and that California in particular was "being asked for a broader release of claims than we can accept and to excuse conduct that has not been adequately investigated."

Harris is referring to the fact that, under the settlement, banks would be released from liability for origination claims – allegations of fraud by lenders when originating the loans themselves. Banks who hold mortgage assignments and lack the original promissory notes on homes that they claim to have ownership of have prompted some legal experts to theorize that robo-signing and other forms of lending malfeasance were so readily performed in order to gloss over a problem that is much more massive and daunting in scope. That is, whether or not many disputed mortgages are valid contracts in the first place.

Borrowers who want to learn more about the federal review process are encouraged to visit IndependentForeclosureReview.com. Reviews must be requested by April 30.