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.

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