Long-delayed compensation to 4.2 million borrowers that were part of the Independent Foreclosure Review will begin April 12, with precise amounts based on the stage of foreclosure and the type of servicer error involved, bank regulators said Tuesday.
The Office of the Comptroller of the Currency and the Federal Reserve Board said payout amounts have been determined for each category of servicer error by using the financial remediation matrix published in June 2012 as a guide — but also “incorporating input from various consumer groups.”
Regulators have published the payment amounts and number of people in each category.
For example, a borrower who was foreclosed upon — but was not actually in default — would qualify for the highest amount of $125,000. If a borrower was not in default, but the foreclosure was rescinded, the individual qualifies for $15,000 in compensation.
More than 1,100 borrowers qualify for $125,000 under the new matrix.
If a servicer initiated or completed foreclosure on a borrower who was protected by federal bankruptcy law, the borrower is entitled to $62,500. Nearly 6,000 borrowers qualify for this amount.
Borrowers who had a servicer complete a foreclosure — even though the borrower was performing all requirements of a written trial-period plan — would qualify for up to $50,000. Nearly 1,000 borrowers qualify for this amount.
Foreclosures are generally considered complete when ownership of the property is transferred to the servicer or investor, and the debt is extinguished. The foreclosure process varies by state.
However, the vast majority of borrowers fall under servicer errors paying out $500 to $6,000 in compensation.
The new payout matrix has been much anticipated by eligible borrowers since the initial Independent Foreclosure Review with 13 mortgage servicers, including the nation’s largest banks, was scuttled in January in favor of a settlement.
Firms were hired for a total of $2 billion over nearly 18 months in an effort that produced scattered results and an unwieldy, poorly-monitored process, according to a Government Accountability Office (GAO) report released last week.
According to the announcement today by regulators, borrowers whose mortgages were serviced by 11 of the 13 servicers — all servicers but Goldman Sachs and Morgan Stanley— will be sent checks “in several waves” beginning with 1.4 million checks on April 12. The final wave is expected in mid-July 2013.
More than 90 percent of the total payments to borrowers at those 11 servicers are expected to have been sent by the end of April.
Information about payments to borrowers whose mortgages were serviced by Goldman Sachs and Morgan Stanley will be announced in the near future.
The agreement, which was reached earlier this year, provides $3.6 billion in cash payments to borrowers whose homes were in any stage of the foreclosure process in 2009 or 2010 and whose mortgages were serviced by one of the following companies, their affiliates, or subsidiaries: Aurora, Bank of America, Citibank, Goldman Sachs, HSBC, JPMorgan Chase, MetLife Bank, Morgan Stanley, PNC, Sovereign, SunTrust, U.S. Bank, and Wells Fargo.
In most cases, borrowers will receive a letter with an enclosed check sent by the Paying Agent — Rust Consulting, Inc.
Some borrowers may receive letters from Rust requesting additional information needed to process their payments. About three weeks ago, Rust sent postcards to the 4.2 million borrowers notifying them of their eligibility to receive payment under the agreement.
Regulators said that borrowers can call Rust at 1-888-952-9105 to update their contact information or to verify that they are covered by the agreement.
Information provided to Rust will only be used for purposes related to the agreement, regulators said.
Borrowers should beware of scams and anyone asking them to call a different number or to pay a fee to receive payment under the agreement, today’s announcement also said.