Regulators Provide Payment Details for $9.3B Foreclosure Settlement
By: Esther Cho
About 4.2 million eligible borrowers should expect to receive a check ranging from hundreds of dollars to $125,000 in the next few months as part of the new agreement that replaced the Independent Foreclosure Review (IFR), regulators announced during a call Wednesday.
Suzanne Killian, senior associate director of the Federal Reserve’s Division of Community Affairs and Ted Wartell, director of community affairs at the Office of the Comptroller of the Currency, (OCC) led the call to provide an update on payments details as part of the foreclosure settlement and to field questions.
In January 2013, federal regulators and 13 banks reached a $9.3 billion agreement, which included $3.6 billion in direct cash payments and $5.7 billion in other foreclosure prevention assistance. The 13 servicers that joined the 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. The IFR was first required as part of consent orders issued in April 2011.
During the call, regulators explained Rust Consulting, the paying agent, will send the 4.2 million borrowers a postcard notifying them of eligibility at the end of this month, and then additional correspondence and a check should follow in 4-8 weeks.
Borrowers can contact Rust Consulting at 1-888-952-9105 to provide an updated address or to see if they are covered under the agreement.
Under the abandoned IFR, borrowers who were in any stage of the foreclosure process in 2009 and 2010 with one of the participating servicers had to submit a request for review to determine if harm was done as a result of a faulty foreclosure action.
Now, all borrowers, whether harmed or unharmed, will receive payments. Regulators explained mortgage servicers will categorize borrowers based on loan characteristics. Categories include borrowers who were eligible for Servicemember’s Civil Relief Act (SCRA) protections, as well as homeowners who were foreclosed on while in bankruptcy or denied a loan modification, among other categories.
Regulators will then determine payment amounts based on categories, and the payment amount is final with no appeal process.
When asked how regulators determined the cash amount servicers would have to pay, Wartell explained the 3.6 billion was an amount negotiated between regulators and servicers, with consideration given to the remaining amount of projected independent consultant costs, other direct costs, such as administrator costs, as well as projected payments that may have been paid to the borrowers for harm if the reviews had been completed.
During the call, one person asked why the regulators are letting banks off the hook. Killian responded by stating, “We don’t believe we are letting the banks of the hook. The dollars that we are talking about, $3.6 billion in direct cash payment, is the largest overall cash payout to borrowers of any foreclosure settlement to date.”
She also added the agreement includes another $5.7 billion in foreclosure prevention assistance.
Ally Financial, EverBank, and OneWest did not join the foreclosure agreement and so eligible borrowers with those services are still being reviewed as part of the IFR, the regulators said.
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