Foreclosure Settlement Still Failing 700,000 Families One Year Later

Comment Off 36 Views

As pledged by federal bank regulators, foreclosure abuse victims should have received nearly $10 billion in a form of a settlement. Yet, one year after this firm promise, hundreds of thousands of people are just as far from the much-needed cash as before. No good news in their mailbox!

Ironically enough, according to the data provided by the Huffington Post, there are about 732,000 settlement checks that were not cashed until January. Just imagine this huge amount of cash – $600 million – not reaching its addressees! We obviously have to wonder why all these checks have remained unclaimed.

An answer could be that the money has been sent to the wrong address. Regulators don’t know for how many checks delivery failed due to this issue. It is generally acknowledged that tracking people down is a very daunting task. 4.4 million people – all got a foreclosure notice from one of the over 12 major U.S. banks – qualify for the money and should have a share of the $3.6 billion settlement amount.

According to an OPC spokesman more than 850,000 checks have been reissued by Rust Consulting – the paying agent – since last fall. Efforts have redoubled in the administration’s attempt to make sure that as many Americans as possible collect their due amount.

Rust Consulting did not comment on the situation, yet, in the past they acknowledged the fact that banks had provided old, inaccurate addresses. What comfort can these explanations give to people who’ve been waiting for their cash for so long?

Many of the check beneficiaries have tried to find out why their money hasn’t reach them yet. Unfortunately, that was a ‘battle’ lost right from the start. Calling over and over again to get an answer may seem out of boundaries, yet it is not. Those responsible for the service fail to answer satisfactorily.

In addition to not getting their checks, some Americans were left without the assistance promised by the foreclosure settlement to modify loan terms. Paradoxically enough, there are cases where despite the pledged support to lower loan rates, mortgage loans owners pay a few hundred dollars more now, than their initial rate, before the refinance. Refinance is supposed to help reduce rates, not increase them. Or at least that’d be the ideal case!

From the many challenges of dealing with the foreclosure epidemic (affecting more than 4 million homes), the failure to mail the checks to the right address is one more hindrance.

Complaints flow from all over the country: thousands of people could have avoided foreclosure if it hadn’t been for misapplied fees, lost paperwork and phone calls with clueless customer service representatives. Such episodes in the lives of thousands of Americans seem too absurd to be true, yet, this is naked reality. And all these claims have the support of an increasing number of academic case studies and insider reports of abuse and misconduct.

In the attempt to deal with complaints, bank regulators launched the Independent Foreclosure Review program, in 2011. Thanks to this program, borrowers could apply for independent consultancy and have an expert thoroughly check their mortgage file to determine the nature of the abuse.

The very idea of this program proved extremely encouraging for people who needed help desperately. The chance to find out what had happened gave hope to many borrowers affected by the foreclosure crisis. The program had its flaws too: it was both slow and expensive and it brought about numerous allegations of bank interference and incompetence.

Once regulators realized the unsurpassable challenges of the reviewing process that took longer than predicted and raised regulation difficulties, a new solution surfaced. This was the Settlement. Regulators dropped the requirement that a claim be submitted in order to receive the payout. The new situation entitled every borrower who received a foreclosure notice in 2009 or 2010 to receive a check of at least several hundred dollars. The banks would calculate the payment determinations.

According to the Office of the Comptroller of the Currency this new approach would allow more people to get more money in a much shorter period of time.

The first to disapprove of this new measure were the hundreds of thousands of borrowers who had applied for a review. Hundreds of hours of precious time wasted in digging through piles of paperwork in order to make justice. It was quite a blow to find out that the very banks they were blaming for the situation would determine the amounts they should get back. Moreover, the decision to compensate approximately 4.4 million people was to substantially decrease the payouts.

And the worst case scenarios did come true when the first checks got in the mailboxes in April 2013. According to data shared by federal regulators with the Huffington Post last year, the average payout was of only $865, an amount way below any estimation. Lots of people received checks as small as $300. The overwhelming majority got $6,000 or less. From all the checks delivered, 400,000 did not reach their beneficiaries because of incorrect address.

The small payouts received by so many people are discouraging for both recipients as well as for those still waiting for their cash. To get just a $300 check after losing your home despite fierce struggle to modify the loan is indeed revolting to say the least.

Some of the foreclosure victims are still waiting for an answer to their situation. After being confronted with a cascade of late fees and with a foreclosure filing, back in 2009, these borrowers are currently paying several hundred dollars more in mortgage rate than before. Among them, there are people who haven’t got their checks yet, and who still don’t know if they qualify for a new loan modification.

What’s even more puzzling is that checks have not reached beneficiaries who have been living in the same place for over 25 years. Nobody can blame incorrect or inaccurate address in such a case. If the lender could send the foreclosure filing, why can’t they send the check?

The question remains open, while still looking forward for an optimistic turn of events…

About the author

Quick View