This article first appeared in the St. Louis Beacon, Dec. 3, 2013 - A foreclosure settlement between federal regulators and mortgage servicers accused of using unsound practices has so far paid out $2.8 billion to nearly 3.2 million Americans, while Democratic lawmakers continue to question the process.
Sen. Elizabeth Warren, D-Mass., Rep. Maxine Waters, D-Calif., and Rep. Elijah Cummings, D-Md., sent a letter to federal regulators on Nov. 15 requesting information about the $9.3 billion settlement process that in early January replaced the controversial Independent Foreclosure Review. The independent reviews were fraught with administrative problems after they were announced by the Office of the Comptroller of the Currency (OCC) in November 2011.
The legislators questioned "whether the settlement amount and terms were adequate, whether it was appropriate for the mortgage servicers themselves to decide how to compensate the borrowers they harmed, and whether the outside consultants hired by the servicers collected and analyzed accurate information.”
Their letter notes that leadership at both the OCC and the Federal Reserve, which negotiated the settlement, had promised months ago that there would be public reporting on the process. The legislators requested that the information be provided to Congress by the end of the year.
The settlement process grew out of the widespread use of “unsound” practices, including robo-signing documents, by lenders and servicers during the flood of foreclosures that followed the collapse of the U.S. housing market.
In 2011, the Fed and the OCC entered into consent agreements with 14 mortgage servicers that established the independent foreclosure review, a case-by-case review process. On Jan. 7, 2013, the Fed and the OCC announced new settlements with many of the servicers, replacing that process. Under the terms of the new agreement, servicers were to pay a total of $9.3 billion in cash payments and other assistance to borrowers, including $3.6 billion in direct payments.
The settlement covers homeowners whose primary residences were in foreclosure in 2009 and 2010. Payments range from $300 to $125,000, according to a payment agreement posted by the OCC, with more than half of the borrowers receiving the minimum amount and just more than 1,000 receiving the maximum.
The OCC reported in mid-November that nearly 4.2 million checks, totaling $3.6 billion, had been issued, although not all checks had been cashed. The checks were good for 90 days as a safeguard against fraud; borrowers with expired checks can have them reissued by calling Rust Consulting, which is handling the payouts, at 888-952-9105, from 7 a.m. to 9 p.m. Monday through Friday, or 9 a.m. to 4 p.m. on Saturdays.
