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Foreclosure payment questions answered

By Polyana da Costa · Bankrate.com
Friday, April 19, 2013
Posted: 12 pm ET

Since I wrote this blog post about the first wave of foreclosure review checks that were mailed out last week, I have received hundreds of questions from homeowners who faced foreclosure in 2009 and 2010.

I called the Office of the Comptroller of the Currency to try to get answers to some of these questions. This is what we know so far.

Will borrowers get repaired credit?

  • Is it true to that under this settlement, the banks are going to be forced to fix the borrower's credit?

No. The settlement does not require the mortgage servicers to fix the credit of the affected borrowers or remove derogatory information from their credit reports. Because the settlement halted the review of the files, regulators were not able to determine if the servicers made errors in your files or if the servicers reported incorrect information to the credit bureaus.

If it serves as consolation, receiving a settlement check does not stop borrowers from disputing credit reporting errors with their mortgage servicers. The settlement doesn't prevent borrowers from suing their servicers over errors or misconduct, says an OCC spokesman. Borrowers can also report their issues to the OCC by calling (800) 613-6743 or they can file a complaint with the Consumer Financial Protection Bureau at (855) 411-2372.

Borrowers whose loans were serviced by OneWest, GMAC Mortgage and EverBank may get a different answer to this question, as these servicers have not signed the settlement to halt reviews. Once the reviews are completed (I prefer if the reviews are completed) the servicers may be asked to correct borrowers' credit ratings, the OCC says.

Will this halt foreclosure?

  • If I got a check but my house is still in foreclosure, will the servicer be forced to stop the foreclosure?

The servicer will not be forced to drop the foreclosure. But borrowers with pending foreclosures can ask their servicers for additional relief to avoid foreclosure. In addition to the checks that are being mailed out, servicers have to provide $5.7 billion foreclosure assistance relief, such as loan modification, short sale and forgiveness of the remaining balance of the loan after the short sale or foreclosure is completed. As Deborah Goldberg of the National Fair Housing Alliance told a Senate Banking committee this week, the problem with this part of the agreement is that "it fails to make saving homes a priority. It places loan modifications, which can save homes, on an equal footing with short sales and deeds in lieu, which do not."

"Not all foreclosures are avoidable," says an OCC spokesman.

What about taxes?

  • Is the foreclosure payment taxable?

Yes, the foreclosure settlement payments are taxable. If you receive a payment of more than $600, expect to get an Internal Revenue Service Form 1099 from Rust Consulting in the first quarter of 2014, as the payment will be reported to the IRS as income. If you get a payment of less than $600, it is still taxable but the paying agent will not report the amount to the IRS.

Have a question? Email me at Polyana.daCosta@Bankrate.com or follow me on Twitter @Polyanad.

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25 Comments
Hoping
May 01, 2013 at 4:38 pm

I was in the 2nd wave. Got my $300 on Tuesday, April 23rd.

ethel
May 01, 2013 at 12:40 pm

i have a question, I had apply for a modification the first time I was denied apply again approve but the payments stayed the same then I was sold to ocwen what listing do I fall under.

stacie
May 01, 2013 at 12:18 am

Yep..got mine yesterday $6000. I think I was in the second wave.

Ray Westphal
April 30, 2013 at 11:06 am

4/30/13 Still NO check here. They said the end of this month we would get one. It's the last day of the month. Has anyone else not recieved theirs yet?

Ray Westphal
April 26, 2013 at 11:42 am

Just checked the mail today 4/26/13 Still NOTHING! I wonder if people are getting their checks from the second wave yet?? I was told the ond of this moth in their postcard.

Mike L
April 24, 2013 at 2:11 pm

My home of 12 years was in the process of foreclosure and I had requested a loan modification. I used a Hud approved advisor and filled out the forms. I was on unemployment and in order to income qualify I used room rentals with a year lease which was later stated unacceptable. When I called Rust consulting (last year) I was told that because I had a Short Sale of my home I was not eligible. I then called Rust Consulting in March and they confirmed my information, the short sale and the loan mod request. I received a check for $300, dated April 18th. I called Rust once more: "no review or explanation or appeal."

Hoping
April 24, 2013 at 11:49 am

Thank you for providing answers on these questions. Exactly what I needed to know. This whole settlement is so messed up! I honestly don't understand why the OCC and Fed did not order correcting everyone's credit report as part of the settlement. After all by settling, the banks are on some level admitting wrong doing. The other thing I'm hoping someone can clarify is what constitute a 'foreclosure'? I'm asking because my house was I thought foreclosed in 2010. The county site shows that the property is registered under the bank, not me anymore. Additionally, I received the 1099 from the bank in 2011 for my taxes. Recently, I submitted a dispute to have my credit report updated and as a result the report is now showing a balance and the interest/past due amount on it which lowered my score. I re-submitted a dispute but haven't received an update yet. I'm hoping that the account would come off or be updated correctly or revert back to what it was, which was a 0 balance but showed a 120+ days past due.

Ray Westphal
April 21, 2013 at 11:04 am

I want to know if the interest on these homes are still building interest or has it stopped ?

sondra
April 20, 2013 at 10:31 am

I think they should pay at least 1\2 of what the house is worth and clean up mortgage credit, and for those that filed bankruptcy return those fees.. The small settlement is nothing compaired to the amout of money put forth to get the home and trying to save it.

Ray Westphal
April 19, 2013 at 9:50 pm

I hope to get enough from them to sue the pants off of them for all the trouble they caused my family.