Mortgage servicers face a March 15 deadline to make initial cash payments into a specical fund from which qualified borrowers will be compensated for wrongful foreclosure actions taken in 2009 and 2010, according to the most recent consent orders between the lenders and bank regulators.
The order dated Feb. 28, 2013 gives the servicers 15 days to make the payments into a “Qualified Settlement Fund,” from which initial cash payments will flow to borrowers.
Up to 4 million homeowners may be eligible to compensation ranging from hundreds of dollars to $125,000, depending on the severity of harm inflicted by the mortgage servicers, from botched paperwork to outright wrongful evictions.
The $9.3 billion settlement replaced the scrapped Independent Foreclosure Review, which amounted to little progress after 18 months at a cost of nearly $2 billion, none of which represented compensation to victims.
The bulk of the money due by March 15 comes from three lenders: Bank of America ($1,127,453,261); Wells Fargo ($765,823,531); and JPMorgan Chase ($753,250,131).
The remainder comes from: Aurora, Citibank, Goldman Sachs, HSBC, MetLife Bank, Morgan Stanley, PNC, Sovereign, SunTrust and U.S. Bank.
By no later than January 7, 2015, the banks must provide full mitigation or other foreclosure prevention actions.
The overall settlement amount includes $3.6 billion in cash payments and $5.7 billion in other assistance to borrowers such as loan modifications and forgiveness of deficiency judgments.
What remains unclear is the distribution plan yet to be finalized by the bank regulators: the Office of the Comptroller of the Currency and the Federal Reserve.
In the initial news release on Feb. 28, the OCC said: “Borrowers are expected to be contacted by the Paying Agent—Rust Consulting, Inc.— by the end of March 2013 with payment details. The Paying Agent will send payments and correspondence.”
Last month’s consent order emphasizes that loss mitigation actions by the lenders should reflect the following guiding principles:
(a) preference should be given to activities designed to keep the borrower in the home;
(b) foreclosure prevention actions s hould emphasize affordable, sustainable,
and meaningful home preservation actions for qualified borrowers;
(c) foreclosure prevention actions should otherwise provide significant and meaningful relief or assistance to qualified borrowers; and
(d) foreclosure prevention actions should not disfavor a specific geography within or among states, nor disfavor low
and/or moderate income borrowers, and not discriminate against any protected class of borrowers.
Borrowers can call the Paying Agent at 1-888-952-9105 to update their contact information or to verify that they are covered by the amendments.
Regulators say borrowers seeking assistance should work with their servicer or a counselor approved by the U.S. Department of Housing and Urban Development (HUD). Borrowers can reach HUD-approved counselors by calling 888-995-HOPE (4673).
The settlement’s official site is here: independentforeclosurereview.com