Two years after bank regulators took their initial “enforcement” action against mortgage servicers in the mostly-defunct Independent Foreclosure Review, checks to nearly 4 million eligible borrowers have started to arrive at mailboxes nationwide.
But anger persists among the recipients of these checks — the vast majority amounting to hundreds of dollars each — representing payouts that fall vastly short when truly accounting for the wrongdoing by the named banks and their servicers, according to the borrowers, consumer advocates and some lawmakers.
Check recipients have taken to forums, social media and various news and blog sites (eCreditDaily included) urging each other to keep banding together and form class-action lawsuits against the banks.
At least one forum had registered nearly 600 IFR borrowers, with many calling for legal action, by late afternoon Tuesday.
Thousands of checks were received Monday, and many more will be delivered this week.
Here are some comments from IFR check recipients — from blogs, forums and Facebook pages where hundreds of foreclosure victims have congregated:
Matt: My check was $800…not nearly enough to make up for losing my home…
Julie: I got my check today – $500.00. My house went into foreclosure, I applied for a modification, never heard back – they basically ignored me. I had thought I would have fallen into the $6000 category, since they ignored my request.
Kylee: We received our check today; it was $400.00. We should have got $3,750.00. We were covered under Bankruptcy law. The home has been sitting vacant for almost 6 years.
SoCal: I received a check today for 6K. I was in the category that should of paid 50k. Class action time!!!!!
Another borrower said she received a check for $300.00 and was not able to deposit it. Her bank informed her more than once that there was no money in the account.
Borrowers under the Independent Foreclosure Review settlement, reached with 13 mortgage servicers earlier this year, have the option to file lawsuits for rightful compensation — an action that will undoubtedly unfold over the next few months as checks continue to be mailed out by Rust Consulting, the paying agent for the regulators.
There is no IFR appeal process. Regulators have made that clear. “The payment amount is final,” both the Comptroller of the Currency and the Federal Reserve say on their IFR web pages.
The one bright spot: Regulators said borrowers were not required “to execute a waiver of any legal claims they may have against their servicer as a condition for receiving payment.”
Last week, a payment framework was released by the Office of the Comptroller of the Currency and the Federal Reserve, with compensation scattered within a sweeping range — from $300 to $125,000.
Out of 3.9 million borrowers, about 2.5 million will get a few hundred dollars each.
Nearly 9,000 borrowers qualify for compensation ranging from $24,000 to $125,000 — involving foreclosures that were initiated or completed against borrowers who had not defaulted on their mortgages or who were meeting all requirements of a documented forbearance plan or were protected by federal bankruptcy law.
Some qualify to receive $3,000 to $50,000 after servicers failed to convert them to permanent mortgage modifications, even after the homeowner completed successful trial periods or were performing all requirements under trial periods.
Nearly 900,000 borrowers who were denied mortgage modifications qualify for an amount between $1,000 to $6,000.
Below those categories in severity of financial harm, botched mortgage modifications played a large part in the amounts configured for payouts, mostly ranging from $300 to $800.
But there is much ambiguity in these supposed lower categories. More than 900,000 borrowers fall under this heading: “Servicer who did not engage with borrower in a loan modification or other loss mitigation action.”
“People who managed to get far enough along in the [modification] process, many of them will get a decent payment,” Alys Cohen of the National Consumer Law Center told ProPublica. “But people who suffered servicer neglect clearly are not getting compensation for the harm they suffered.”
Many borrowers have complained of not being placed in the rightful category, some saying they should have been placed in more than one category.
Commented Christina to eCreditDaily: “We received 500.00 today. We had 3 different categories we fell into, and they choose the one we didn’t fall into. Very sad…”
Checks are being sent “in several waves beginning with 1.4 million checks on April 12,” the OCC said. The final wave is expected in mid-July 2013. But more than 90 percent of the total payouts to borrowers by 11 servicers are expected to be sent by the end of April.
The banks and their servicing affiliates that are part of the IFR agreement are: Aurora, Bank of America, Citibank, Goldman Sachs, HSBC, JPMorgan Chase, MetLife Bank, Morgan Stanley, PNC, Sovereign, SunTrust, U.S. Bank, and Wells Fargo.