The Office of Comptroller of the Currency (OCC) said today the more than 2.2 million people have cashed or deposited the checks they have received from the Independent Foreclosure Review Payment Agreement.  These executed checks represented total payments of $2 billion paid to borrowers whose homes were in some stage of foreclosure in 2009 and 2010 and whose mortgages were serviced by one of 13 major servicers which reached a settlement with the OCC and the Federal Reserve to end independent reviews of foreclosure problems and abuses.    

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

Immediately after the first checks were mailed last month borrowers started reporting that their checks were returned for insufficient funds.  Rust Consulting, settlement agent for the banks, downplayed the incident saying it only affected a handful of customers and happened because Rust had forgotten to move funds into the account to cover the checks.  Now the New York Times, Los Angeles Times and other media outlets are reporting even more serious problems with the payout

The New York Times said today that a fresh round of checks that had gone out from Rust were written for the wrong amounts.  The paper, quoting sources that had been briefed on the matter, said the firm had issued nearly 100,000 checks for less than homeowners were owed.  Federal regulators have ordered Rust to fix the mistake and the company said late Wednesday it had corrected what it called "a clerical error" and rather than issuing replacement checks would be sending checks for difference owed by May 17.

To quote the times regarding Rust Consulting: "With more than 50 federal contracts to its name, and its own political action committee spreading campaign donations across Washington, Rust has become a favored middleman for class-action lawsuits and government settlements."  The paper said executives from some banks had suggested a different firm to handle the settlement but "regulators balked," suggesting instead that the banks hire Rust.

After it was hired in January the firm was slow to alert borrowers to expect payments then delayed the payout for weeks.  Borrowers have also complained of administrative errors on the part of the company such as checks sent to the wrong addresses or sent to deceased borrowers.  The Times said some of the errors will be difficult to remedy.  For example, for complicated reasons Goldman Sacs and Morgan Stanley had agreed to pay borrowers slightly more than the other banks but Rust issued checks based on the metrics used for the other 11 servicers.  This resulted in some checks that were thousands of dollars less than borrowers expected.  "The problem was wide-ranging. About 96,000 of the 220,000 Morgan Stanley and Goldman Sachs customers received the wrong amount, according to regulators. It most likely affected every borrower who was entitled to more money under the Goldman Sachs and Morgan Stanley plan," the Times said.

Representative Elijah E. Cummings (D-MD) called the payout the "worst settlement I have seen in my life."  He has opened an investigation into the problems and the hiring of Rust.