Independent foreclosure review checks
In March, 4.2 million Americans were sent notices in the mail from Rust Consulting that they would receive compensation as part of a massive settlement reached between the federal government and 13 mortgage servicers, ranging from $300 to $125,000 depending on financial harm by the events surrounding their foreclosure activity, as assessed by an independent third party consulting firm.
Fully 2.4 million borrowers will receive a $300 independent foreclosure review check, and roughly 1,300 borrowers will receive $125,000, with the larger checks going primarily to military members whose illegal foreclosures violated the Servicemembers Civil Relief Act. The remaining borrowers will see roughly $500 to $800 checks.
The $1.5 billion of settlement funds were allocated to compensating wronged borrowers wrongfully foreclosed upon after January 1, 2008, primarily as a result of robo-signatures wherein no human reviewed the foreclosure file prior to homes being repossessed, leading to thousands of illegal foreclosures. Many homeowners were either refused a loan modification or the arrangements with the bank were simply missed by the non-existent review process.
Most report receiving a $300 check
Homeowners were notified by mail of their right to file a claim and originally, and the uniform payment amount was said to average $2,000 per borrower, but have been dispersed in a less than uniform way. Some borrowers claim they were notified they would be receiving one amount and actually received less – most report receiving a $300 check.
It is said that borrowers who get a check in the mail are not waiving any rights to sue by cashing their check, and may seek additional relief in the courts and are still eligible for additional restitution through banks and servicers. Some borrowers are reporting, however, that they are being told by Rust Consulting over the phone that after the review period they will have no recourse, so confusion continues.
Some independent foreclosure review checks subject to taxes
Short sale expert, Melissa Zavala notes that some checks are subject to taxation, pointing to the Independent Foreclosure Review site which says that the entire “base payment” may be subject to taxation as income depending on the borrower’s individual circumstances.
For checks in an amount of $600 or greater, the Paying Agent will report such payments as income to the IRS and appropriate state agencies and to borrowers on a Form 1099 MISC.
Consumer sentiment varies
Andrita Sanford said, “This is disgraceful. People lost their homes and had to uproot their families yet all they will receive is a $300! The banks shady practices haven’t hurt them as much as it has destroyed once thriving neighborhooods [sic] & communities. If they really want to help people, they should remove ALL negative mortgage debts from the credit reports of those that were affected by this act of corruption.”
This sentiment has been common with online commenters and principle forgiveness is the cornerstone of the biggest battle regarding housing, with Federal Housing Finance Agency (FHFA) Director, Edward DeMarco being asked to resign for his continued refusal to forgive debt, or, as some consumers have requested, remove it from their credit.
ALR said, “Got $300… lost everything, but am thankful for even this paultry [sic] amount.”
Michael L. who lost his own home opined, “The idea that people are complaining about getting an additional check for such and such amounts because they didn’t pay their bills in the first place is comical (and is sad at the same time). Maybe it’s the sue happy reality we live in or the common belief that we’re all entitled to a handout nowadays.”
One commenter noted that $300 is “a slap in the face,” telling their bank to “just keep it and stop insulting me.”
Details of the independent foreclosure review
AGBeat columnist, Melissa Zavala wrote, “As you may recall, the Independent Foreclosure Review is part of the settlement associated with the robo-signing debacle of 2010 (title my own). As part of this review, thirteen mortgage servicers and their affiliates identified customers who were part of a foreclosure action on their primary residence during the period of January 1, 2009 to December 31, 2010.”
Zavala continued, “These 13 mortgage servicers sent solicitation letters to 4.2 million potential victims of robo-signing and other foreclosure-related (and potentially fraudulent) matters. These letters provided homeowners the opportunity to request an independent review of their foreclosure process (a.k.a. Independent Foreclosure Review). If the review found that financial injury occurred as a result of errors, misrepresentations, or other deficiencies in the servicer’s foreclosure process, the customer might receive compensation or another remedy.”
The deadline to request an independent review was December 31, 2012 and eligibility is outlined here.