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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
Larry
May 27, 2013 at 8:08 am

I am in the process of going through a forclosure. The bank is doing everything they can to get the final judgement as high as posible because the FDIC guranteed the loan and the holder will be paid in full.
My question
The bank has signed and given my wife and I a signed release and waiver of defincy. I am told that this will be on my record for 10 years. Is there anyway to have it noted on the credit report that
a) I am not responsible for the amount of the forclosure judgement as I have been released
or
b) If the holder of the mortgage gts 100% of the loss back from the FDIC how can they still hold a Judgement against the debtors that can never be collected

Ray Westphal
May 12, 2013 at 11:37 am

More money will be sent out as May 17th for clerical errors made. this will be in an addition checks. I think people have complained enough that it is creating havoic. They are being forced to do something about it. There are many big blogs out there that people are upset and screaming about it, so I encourage you to find them and join in.

Ray Westphal
May 09, 2013 at 12:31 am

Okay, I have been searching for blogs. I found one that has a lot of information. I have learned that if you get a certified letter from Rust, it is a higher range. People are also talking about that the last checks seem to be higher amounts. Most have only recieved $300 to $800.00. I have found were one person recieved $125.00 and two more recieving in the $30,000 range. Most everyone has been really upset and wanting justice. So I do not believe this rodeo is over. There is also a petition that people are signing to get the government to do something about it. I read where someone recieved $37k and still signed the petition. This is a growing madness if you look around the internet.

Michelle
May 08, 2013 at 9:32 pm

Is the VA going to try & come back & claim any part of these checks if after the foreclosure they had to pay anything out?

Ray Westphal
May 08, 2013 at 5:27 pm

Everyone will get a little something for sure if they were in that time frame. It could have been under a maiden name or your husbands or maybe you got divorced and he got the check and is in the Bahamas nowwith the mamas, no just kidding!It could be just a simple mistake of address or name. My wife and I were actually foreclosed on in 2008 through 2009 and they stopped. Then they said we were definatley eligable to do the HAMP to remodify. Then the told us to wait until December to do the remodify and they broke into our home instead. Three weeks later they broke into our home again only this time I caught them in the act and I was going to shoot him if my wife would have let me but she said take a video camera instead. Anyway thats over with and taken care of now.

Sarita
May 07, 2013 at 2:31 pm

My home was foreclosed on in 2010 and I just found out about this. I called the Independent Foreclose Review 800 number and they said I don't fall under the agreement, Although everything I read said I did. I was denied a loan modification and my home was sent to foreclosure days later. Who can I contact about this to determine if I should be receiving a refund??

Ray Westphal
May 06, 2013 at 7:53 pm

I just recieved the exact same thing in the mail today. I wondered what it meant, does anyone know? I think it means it will be over $600.00 and if they are worried that we cant pay in come tax time it must be a large amount! Does anyone know?

Aaron
May 06, 2013 at 5:58 pm

I just received a W-9 from Rust stating that they are going to take up to 28% tax out and I need to send certification back to make sure correct SSN. Im hoping this means the check is more than 10k?

Ray Westphal
May 01, 2013 at 11:09 pm

Called Rust Consulting today because I thought they were done sending checks. They told me Friday they will send out the 4th wave of checks. The 5th wave will be in July. I asked them since I am going to be the 4th wave, does that mean good things come to those who wait? and she said yes! and I could tell she was smiling. So we will see next week and I will post it.

Chelle
May 01, 2013 at 7:19 pm

@ethel same happened to me. I was denied a mod. got foreclosure papers that house would be sold the next month. I was already in bankruptcy so we moved. Foreclosure was rescinded and got letter 2mos later that we were approved. It was too late we were already under new lease. I'm expecting only $300.00 because even though I was denied at first, they approved me later .