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MELISSA BLOCK, HOST:

This is ALL THINGS CONSIDERED from NPR News. I'm Melissa Block.

GUY RAZ, HOST:

And I'm Guy Raz.

Foreclosures, millions of them have been a central feature of the economic downturn. Preventing more of them is widely believed to be crucial to economic recovery. For some homeowners facing foreclosure, the Obama administration has been pushing banks to make loans more affordable. But the effort has been marred by mistakes.

BLOCK: Now the federal government is launching a nationwide review of foreclosures over the past couple of years. The review will be seeking homeowners who were treated unfairly by banks.

As NPR's Chris Arnold reports, unfair treatment can cause a lot of damage.

CHRIS ARNOLD, BYLINE: Banks have just started mailing out letters to upwards of four million homeowners. And federal regulators have ordered them to do that to try to find people who have suffered financial harm due to the banks' mistakes, and to offer, quote, "remediation."

Plenty of homeowners feel that they've been harmed, many because they didn't get what's called a loan modification.

GARY KLEIN: It is really quite shocking.

ARNOLD: Gary Klein is an attorney who represents homeowners. He says that many should have qualified for lower interest rates through President Obama's foreclosure prevention program.

KLEIN: There are tens of thousands of people across the country who, because the banks were doing such a bad job of implementing the program, didn't get a modification and who are therefore out of their homes.

ARNOLD: Klein shifts over to his computer and pulls up a letter that Bank of America recently sent to one homeowner.

So what are we looking at here?

KLEIN: We heard from a woman in Wisconsin named Christina King who had applied for the Home Affordable Modification Program, HAMP, and was denied.

ARNOLD: It turns out Christina King was the perfect candidate for this Obama loan mod program and should have been approved. The Kings had saved up a $20,000 down-payment when they bought the house. But they ended up stuck in an expensive 10 percent interest rate home loan from Countrywide.

CHRISTINA KING: And this is not a big, huge house. This is $130,000 house; a very small, modest home. So, for us, this was not anything like we bought too big for our britches. It was that my husband, working in architecture - a lot of engineering got shut down.

ARNOLD: King says her husband had his hours cut way back at work. And when they tried to get a loan modification, she says Bank of America repeatedly lost documents, claimed that she didn't make a payment when she actually did make the payment. And then she was told that she was being evicted. Whether the bank took ownership of the house is actually unclear. But the bank put a big foreclosure sign on the front door and changed the locks.

KING: We tried to prove it and tried to talk to them. They said there's nothing we could do - that we missed a payment. We showed them that I had photocopies of the cleared checks. No, they refused. You know, and I have eight children.

ARNOLD: Today, King and her husband and their eight children are living in a local church rectory. The church is letting them stay there while they look for another place to rent. But in September, Bank of America sent the Kings a pretty surprising letter. More than a year after they had left their house they get this letter.

Lawyer Gary Klein reads from the letter.

KLEIN: (Reading) We told you that your loan was not eligible for this program because you missed a trial period plan payment. However, this was incorrect. We apologize for any inconvenience this may have caused you.

So what they're doing is they're acknowledging they made a very big mistake.

ARNOLD: And the letter goes on to offer the Kings a loan modification. But the problem now is the King's house has stood vacant for a year through a Wisconsin winter and it's a wreck.

KING: There's over six feet of water in the basement. The furnace is destroyed. The sewer system backed up because there's sewage in the upstairs bathroom and in the first floor. It's infested with mice.

ARNOLD: After NPR contacted Bank of America about this, the bank pledged to help the Kings. We talked to Dan Frahm, who's a senior vice president at the bank, and asked him, what happens next?

DAN FRAHM: We are committed to working with them to ensure that their home is returned to the quality that they left it in. We will absolutely invest to make the repairs necessary in the home. And in terms of what happens while those repairs are underway, we'll work with the King family to determine what's in their best interest. But certainly we'll support them on their need for some temporary housing.

ARNOLD: So it sounds like the Kings will get their house back.

But their case was not part of this new review process that's just getting underway. And there's bound to be tens or even hundreds of thousands of people who feel they've been harmed by similar mistakes. Sorting through all that will be a giant undertaking. And some housing experts are skeptical that that many people will get a response like the Kings did.

Chris Arnold, NPR News.

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