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
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.
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
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.