Foreclosure Payout Nears End after Error-Plagued Start

Over two-thirds of the $3.4 billion in checks issued to borrowersrnwho were aggrieved by various foreclosure mistakes or inequities hadrnbeen cashed as of July 11. The Office of Comptroller of the Currencyrn(OCC) said Friday that nearly 2.9 million checks totaling over $2.5rnbillion had cleared the account used for the settlement payments. </p

This is news primarily because of the history of the settlementrnand the payment checks. The settlement occasioning the payout wasrnreached by OCC and the Federal Reserve with 13 of the largestrnservicers late last year. In return for an agreed upon $3.6 millionrnin cash and other compensation the regulators agreed to halt the Independent Foreclosure Review they had ordered to identifyrnborrowers harmed by foreclosure related problems. All homeowners whornwere in foreclosure in 2009 and 2010 and whose loans were serviced byrnone of the 13 are eligible for compensation under the agreement.</p

First there was much criticism of the settlement amounts whichrnranged from $300 to $125,000 dependingrnon the degree of abuse suffered by borrowers and/or their financialrnlosses. Many of the borrowers had lost their homes, some in error,rnand others had suffered financial loss fighting the foreclosure beenrnmisled or otherwise harmed by the process. </p

Then RustrnConsulting was hired as the banks’ settlement agent. First the firmrnwas slow to alert borrowers to expect payments then they delayed thernpayout for weeks. Borrowers complained of checks sent to the wrongrnaddress or to deceased borrowers. One glitch led to most of therncustomers of two banks getting checks for the wrong amounts. </p

Immediatelyrnafter the first checks were mailed in April borrowers startedrnreporting that their checks were returned for insufficient funds. Rust downplayed the incident saying it only affected a handful ofrncustomers and happened because Rust had forgotten to move funds intornthe account to cover the checks. </p

InrnMay ThernNew York Times reported thatrna fresh round of nearly 100,000 checks that had gone out from Rustrnwere written for the wrong amounts. Rust corrected that error andrnmailed out checks for the difference in amounts by late May. Thatrnmonth Representative Elijah E. Cummings (D-MD) called the payout thern”worst settlement I have seen in my life” and opened anrninvestigation into the problems and the hiring of Rust. </p

Withrnthe settlement payout apparently back on track, OCC said that checksrnto the remaining borrowers will issued later this summer.

All Content Copyright © 2003 – 2009 Brown House Media, Inc. All Rights Reserved.nReproduction in any form without permission of MortgageNewsDaily.com is prohibited.