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4.2 million U.S. borrowers begin to receive foreclosure settlement checks

This article first appeared in the St. Louis Beacon: On Tuesday, Steven Peterson of Belleville received a check for $2,000 -- his portion of a $3.6 billion settlement reached earlier this year between lenders and federal regulators that replaced a failed foreclosure review process.

"I would call it a down payment on justice,’’ said Peterson, whose mortgage struggles started when he was laid off in 2009. "We’ll see if they want to pay the rest of the tab. I know I already have.’’

Peterson is one of 4.2 million Americans eligible for compensation under the negotiated settlement reached in January between some of the nation's largest mortgage lenders and the Office of the Comptroller of the Currency (OCC) and the Federal Reserve.

The settlement replaced the Independent Foreclosure Review program that was fraught with problems since November 2011 when it was announced by the OCC. The reviews were intended to hold accountable mortgage servicers who used unsound practices -- including robo-signing documents – to process the flood of foreclosures following the collapse of the U.S. housing market. The settlement covers American homeowners whose primary residences were in foreclosure in 2009 and 2010.

The OCC, which is tracking the payment status on its website, reported that 342,558 settlement checks worth $333 million have been cashed or deposited, as of April 17. Payments range from $300 to $125,000, according to a payment agreement posted by the OCC, with more than half of the borrowers receiving the minimum amount and just over 1,000 receiving the maximum.

Peterson noted that his $2,000 payment is more than most borrowers got, but he said it doesn’t come close to compensating him for his losses.

"It’s less than 10 percent of what I lost. It’s kind of a booby prize in that respect,’’ said Peterson, who has been posting online about his foreclosure experiences with PNC bank, one of 13 lenders that signed the settlement. Peterson’s experiences were first detailed in astory published in November 2012 by the St. Louis Beacon. 

Peterson, who found a new job and relocated to the Belleville area, was unable to find a buyer for the home in Bloomington, Ill., that he and his wife had purchased in March 2003 for $144,000. His mortgage was a conventional loan -- not one of the troublesome subprime mortgages that brought down several of the nation’s largest financial giants after the housing bubble burst. Peterson said he had made more than $92,000 in mortgage payments over the course of 6.5 years and had invested about $10,000 in home improvements. The home finally sold in a short sale for about $125,000.

Peterson said his bank was entitled to a profit, but he believes the process allowed his lender to keep his equity, as well.

"They deserve to make some money. But once you take the principal and then a reasonable profit on top of that, there should have been $25,000 to $30,000 left over. That would be my equity, and they’re hanging on to it,’’ he said.

Peterson has posted a copy of the letter and settlement check he received on his website.

The accompanying form letter notes that by cashing or depositing the checks homeowners do not waive any legal claims against their servicers and that they may pursue additional actions related to their foreclosures.  The letter also notes that “this payment does not mean that you necessarily suffered financial injury or harm.”

Bouncing settlement checks and more scrutiny

Although there have been reportsof settlement checks bouncing since Rust Consulting Inc., the paying agent, began mailing them last week, Peterson said he had no issues when he deposited his check.

In a statement Wednesday, the Federal Reserve said that Rust had acknowledged some early problems but had corrected them. Homeowners were told to monitor their payments and call Rust at 1-888-952-9105 if they had any problems. 

Rust also posted a statement on its website from a senior executive apologizing for the problems and verifying that the settlement checks were valid and that $3.6 billion was available to cover them.

The bounced checks have drawn more criticism from housing advocates who argue that the settlement favors lenders and fails to provide an accounting of what the lenders are compensating homeowners for.

Peterson said he plans to continue writing about his foreclosure experiences and hasn’t ruled out legal action. He has been following the hearings by the Senate banking committee that is investigating the failure of the independent foreclosure review program and the oversight process used by federal bank regulators.

"Nobody is talking about how any of the decisions were made,’’ Peterson said.

In March, a Washington law firm filed a federal lawsuit seeking documentation of how the OCC selected the consulting firms it used to perform the bank reviews. 

The OCC said that settlement checks are being sent in several waves, with the final wave expected in mid-July.  The settlement covers borrowers with the following servicers: Aurora, Bank of America, Citibank, Goldman Sachs, HSBC, JPMorgan Chase, MetLife Bank, Morgan Stanley, PNC, Sovereign, SunTrust, U.S. Bank, and Wells Fargo. Checks have not yet gone out to borrowers of Morgan Stanley and Goldman Sachs.

According to the payment agreement, the highest settlement amount -- $125,000 -- went to members of the armed services who had been foreclosed on, despite being protected by the Servicemembers Civil Relief Act (959 borrowers) or who were foreclosed on even though they were not in default (45 borrowers).

Mary Delach Leonard is a veteran journalist who joined the St. Louis Beacon staff in April 2008 after a 17-year career at the St. Louis Post-Dispatch, where she was a reporter and an editor in the features section. Her work has been cited for awards by the Missouri Associated Press Managing Editors, the Missouri Press Association and the Illinois Press Association. In 2010, the Bar Association of Metropolitan St. Louis honored her with a Spirit of Justice Award in recognition of her work on the housing crisis. Leonard began her newspaper career at the Belleville News-Democrat after earning a degree in mass communications from Southern Illinois University-Edwardsville, where she now serves as an adjunct faculty member. She is partial to pomeranians and Cardinals.