Bank regulators keeping tally of checks cashed in the Independent Foreclosure Review (IFR) mailings put the running total at more than $2 billion as of Thursday, but that amount should have been higher if not for more fumbling by the paying agent, Rust Consulting.
Compensation checks in the IFR borrower-abuse agreement have gone through four mailing waves since April 12. The last one on May 3 turned out to have short-changed many recipients.
Rust Consulting conceded that more than 40 percent of the 217,000 checks that went out that day, or 96,000, underpaid recipients. Rust had already faced some chastising from the Federal Reserve after the first phase of payouts on April 12, when some of those initial checks actually bounced.
For the up to 4 million compensation recipients, the payments screw-up is adding to their anger over getting less than they thought they should, compared to the abuses they were dealt during wrongful or botched foreclosures in 2009 and 2010.
Borrowers see this phase in the two-year-old IFR process has yet another salvo from the big banks and their regulators, who have come under intense heat from consumer advocates and many lawmakers over the foreclosure reviews abandoned in haste this January in favor of a $9 billion settlement with 13 mortgage servicers.
Now comes the sequel to the IFR payments: compensation checks in the other agreement, the older National Mortgage Settlement (NMS), reached more than a year ago with five top U.S. lenders: Ally/GMAC; Bank of America; Citi; JPMorgan Chase; and Wells Fargo. Up to 750,000 borrowers may be eligible for NMS payments, totaling $1.5 billion. Some borrowers are eligible for both IFR and NMS checks.
Rust Consulting is also the paying agent for the NMS, approved by bank regulators to handle mailings and payments for both settlements.
In February, the National Mortgage Settlement official website was updated to say that checks to NMS claimants would be mailed out by “mid-year 2013.” That statement went unchanged for two months until April 22, when suddenly it said checks would go out in“4 to 6 weeks.”
Borrowers were even more encouraged a few days ago when the website message was tightened to say payments would be mailed “mid to late May.”
However, suddenly the website statement’s timetable changed yet again, reverting back to “mid-2013″ this week, further infuriating many eligible NMS borrowers, many of whom have expressed their anger through comments on eCreditDaily.
Many decided to call or text executives at Rust Consulting to get a clearer answer on the NMS timetable. Others have tried contacting their state attorney general or bank regulators. Still no clear answer on the NMS payment dates.
One thing seems clear. The very latest shift back to a “mid-2013” NMS payout timetable coincided with Rust Consulting’s latest snafu with the fourth wave of IFR checks mailed out on May 3. Those checks to 96,000 borrowers are tied to loan servicing errors or wrongdoing by Goldman Sachs (Litton Loan Servicing) and Morgan Stanley (Saxon Mortgage Services).
Rust Consulting said it has corrected the error and plans to mail supplemental checks to affected borrowers as soon as May 17, 2013, for the additional amounts they were supposed to be paid, according to the Federal Reserve.
Meanwhile, the official overseer of the NMS, appointed by state attorneys general and federal housing officials, Joseph Smith, has not made any statement about payment snafus. His oversight office is busy preparing its first official report to determine if the five NMS lenders are meeting their new mortgage servicing standards.
The report, due to be released in June, is expected to be critical, reflecting complaints from housing counselors and state AGs over continued foreclosure-prevention mishandling or delays by the big banks. New York Attorney General Eric T. Schneiderman said this week that his office will file lawsuits against Bank of America and Wells Fargo for “repeatedly” violating the settlement’s rules.
Meanwhile, borrowers can file a complaint about their servicers through this page on the NMS overseer’s website. Or, consumers can file mortgage-related complaints directly through the Consumer Financial Protection Bureau.