Independent Foreclosure Review Payments Amount to Comedy of Errors

by devteam May 11th, 2013 | Share

The Office of Comptroller of thernCurrency (OCC) said today the more than 2.2 million people have cashed orrndeposited the checks they have received from the Independent Foreclosure Review</bPayment Agreement.  These executed checksrnrepresented total payments of $2 billion paid to borrowers whose homes were inrnsome stage of foreclosure in 2009 and 2010 and whose mortgages were serviced byrnone of 13 major servicers which reached a settlement with the OCC and thernFederal Reserve to end independent reviews of foreclosure problems andrnabuses.    </p

The first wave of checks was sent tornborrowers serviced by 11 of the banks on April 12 and to date more than 3.9rnmillion checks totaling $3.4 billion have been mailed.  The checks range from $300.00 to $125,000rndepending on the degree of abuse suffered by borrowers and/or their financialrnlosses.  A final wave of checks fromrnthese servicers will be issued during the summer.  There was no further information on thernstatus of payments from the remaining two servicers.  </p

Immediately after the first checks werernmailed last month borrowers started reporting that their checks were returnedrnfor insufficient funds.  Rust Consulting,rnsettlement agent for the banks, downplayed the incident saying it only affectedrna handful of customers and happened because Rust had forgotten to move fundsrninto the account to cover the checks. rnNow the New York Times, LosrnAngeles Times and other media outlets are reporting even more seriousrnproblems with the payout.  </p

ThernNew York Times saidrntoday that a fresh round of checks that had gone out from Rust were written forrnthe wrong amounts.  The paper, quoting sourcesrnthat had been briefed on the matter, said the firm had issued nearly 100,000rnchecks for less than homeowners were owed. rnFederal regulators have ordered Rust to fix the mistake and the companyrnsaid late Wednesday it had corrected what it called “a clerical error” and ratherrnthan issuing replacement checks would be sending checks for difference owed byrnMay 17.</p

To quote the times regarding Rust Consulting: “With more than 50 federalrncontracts to its name, and its own political action committee spreadingrncampaign donations across Washington, Rust has become a favored middleman forrnclass-action lawsuits and government settlements.”  The paper said executives from some banks hadrnsuggested a different firm to handle the settlement but “regulators balked,”rnsuggesting instead that the banks hire Rust. </p

After it was hired in January the firm was slow to alert borrowers to expectrnpayments then delayed the payout for weeks. rnBorrowers have also complained of administrative errors on the part ofrnthe company such as checks sent to the wrong addresses or sent to deceasedrnborrowers.  The Times said some of thernerrors will be difficult to remedy.  Forrnexample, for complicated reasons Goldman Sacs and Morgan Stanley had agreed tornpay borrowers slightly more than the other banks but Rust issued checks basedrnon the metrics used for the other 11 servicers.  This resulted in some checks that werernthousands of dollars less than borrowers expected.  “The problem was wide-ranging. About 96,000rnof the 220,000 Morgan Stanley and Goldman Sachs customers received the wrongrnamount, according to regulators. It most likely affected every borrower who wasrnentitled to more money under the Goldman Sachs and Morgan Stanley plan,” the Times said.</p

Representative Elijah E. Cummings (D-MD) called the payout the “worstrnsettlement I have seen in my life.”  Hernhas opened an investigation into the problems and the hiring of Rust. 

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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