Foreclosure Settlement Hits Several Bumps

Going back two weeks, the results of the $9.3 billion foreclosure settlement with 13 banks began to unfold. Since that point, the same level of incompetency that characterized big banks’ role in the foreclosure crisis continued.

For those that don’t know, the settlement involved 13 banks agreeing to pay $9.3 billion for their liability in the robo-signing scandal. Out of this, $3.6 billion was allotted to 4.4 million homeowners who lost their properties in 2009 and ’10 due to illegal practices, with roughly $2 billion given to the independent consultants assigned to review foreclosure files as part of the Independent Foreclosure Review (IFR) program.

The program, which has since ended, found just 6.5 percent of the documents had errors, later lowering this figure to 4.2 percent.

Bounced Checks

The first sign, according to a Bankrate.com article from April 18, was bounced checks from the Federal Reserve. After the homeowners informed the Federal Reserve, the government organization now says the issue has since been resolved.

Poor Allocation of Funds

In an editorial for Rolling Stone, Matt Taibbi pointed out on April 26 the imbalance of funds: Specifically, homeowners who lost their properties more than three years ago ended up with just $300 each, while the IFR consultants were essentially paid $20,000 per file reviewed.

Because of this, House Democrats are now requesting, as of April 25, independent consultants oversee how the funds are getting distributed and ensure homeowners actually receive the payments.

Checks are Smaller Than Expected

Since the checks went in the mail, readers wrote to the Huffington Post about the extremely low amounts received from the settlement; one homeowner profiled expected to receive $125,000 for the property lost and, instead, ended up with $800.

As the piece explains, the Office of the Comptroller of the Currency and the Federal Reserve grouped the homeowners into 11 categories to determine payments between $300 and $125,000, with no clear explanation. The Huffington Post points out that, out of the 4.4 million, 97 percent received checks below $6,000 and less than 2,000 saw $125,000.