If your home was in the process of foreclosure in 2009 and 2010, you may be getting a check in the mail next week.
More than 4 million borrowers will receive payments ranging from $300 to $125,000, as a result of a settlement over improper foreclosure practices reached between regulators and mortgage servicers. The checks are scheduled to be mailed out starting Friday.
To benefit from this agreement, your loan must have been serviced by one the following companies, their affiliates or subsidiaries:
- Bank of America.
- Goldman Sachs.
- JPMorgan Chase.
- MetLife Bank.
- Morgan Stanley.
- U.S. Bank.
- Wells Fargo.
Borrowers will receive payments even if they were not victims of errors or misconduct by the servicers when their homes were in foreclosure.
Why does everyone get a piece of the pie?
Originally, regulators required servicers to hire third-party consultants to identify borrowers who suffered financial injury. They also offered borrowers a chance to have their foreclosure files reviewed for potential errors, so that the victims could receive compensation for the wrongdoing.
A year later and after more than $2 billion was paid to consultants reviewing the files, regulators decided that the process was too complicated. They put an end to the foreclosure reviews and reached an agreement with the mortgage servicers to provide $3.6 billion in cash payments to borrowers.
How do you get your share?
If your mortgage was serviced by one of the companies listed in the settlement, and you faced foreclosure in 2009 and 2010, you probably will receive a check sometime between next week and the end of July. About 1.4 million checks are expected to be sent by the end of April. The final wave of checks goes out by mid-July.
Goldman Sachs and Morgan Stanley are part of the agreement, but borrowers whose loans were serviced by them will not get paid yet. Information to these borrowers will be announced in the near future, the Federal Reserve says.
The checks will be sent by Rust Consulting Inc. If you want to confirm that you qualify for a payment or have moved and need to update your contact information, call (888) 952-9105. You will have to listen to a series of automated messages for about three or four minutes, but you'll get to talk to a representative after that.
How much will you get?
The payment amounts will be based on the stage of a borrower's foreclosure and the type of "possible servicer error" that regulators think you may have been a victim of.
How did regulators identify possible errors without reviewing the loan files? An OCC spokesman said that, rather than trying to identify potential errors, regulators used multiple automated systems to identify "objective" loan attributes such as:
- The stage of foreclosure.
- Whether a borrowers' loan modification was approved or denied.
- Whether the borrower had requested a loan review.
The Federal Reserve and the OCC provided data with the payment details that resulted from this automated process. Here is a sample of the loans that qualified for compensation:
Loan mod was denied
According to the data, more than 300,000 borrowers lost their homes to foreclosure after loan modifications were denied. These borrowers will receive $3,000 each. Those who fall under this category and had previously requested a loan review will get $6,000.
Successful trial mod wasn't made permanent
Borrowers who got a loan modification and completed the payments required under the trial period but still lost their homes to foreclosure after the lender failed to convert the modification to permanent, will get $25,000 ($50,000 if they requested a review).
Borrower wasn't even in default
Some borrowers will get the maximum payment of $125,000. They include 53 homeowners whose homes were foreclosed on even though they were not in default.
Foreclosure hasn't been completed
If you've been through the inconvenience of having the lender try to foreclose on your home but the foreclosure is still in process, you (and about 600 other borrowers) will get about $5,000.
What do you think of this agreement?
I'd love to hear from borrowers who think they will be getting a check.
Follow me on Twitter @Polyanad.