The payments will range between $300 and $125,000, depending upon which stage of the foreclosure process they were in and the nature of the possible violation. According to the regulators' payment agreement plan, the highest amount of $125,000 will go to 1,082 borrowers who were eligible for protection from foreclosure under the Servicemembers Civil Relief Act, but were foreclosed upon anyway. Banks also foreclosed upon 53 borrowers who were never in default to begin with, who will also be entitled to $125,000. Servicers also completed foreclosures on more than 230,000 borrowers even though the borrowers had approved for a mortgage modification. Those borrowers will each get a check for $300. About 640 borrowers who were meeting all the requirements of trial modification periods were also foreclosed upon. Those borrowers will each get a check as high as $25,000, depending upon which stage of foreclosure they were in. The payment details can be found at the bottom of the press release. Eleven of the 13 servicers will begin making payments starting April 12, with 90% of the checks expected to be sent out by the end of April. The final wave of checks is expected to be sent out by mid-July. Goldman Sachs (GS - Get Report) and Morgan Stanley (MS) will send out payments at a date to be announced in the near future, according to the Federal Reserve.
In most cases, borrowers will receive a letter with an enclosed check sent by the Paying Agent -- Rust Consulting. Some borrowers may receive letters from Rust requesting additional information needed to process their payments, the Fed said. Rust is sending all payments and correspondence regarding the foreclosure agreement at the direction of the Office of the Comptroller of the Currency and the Federal Reserve. The OCC and the Federal Reserve said earlier this year that they would cease a costly and inefficient review process that began in 2011 to identify foreclosure law violations that were widespread in the wake of the crisis. Instead, servicers would be required to pay $3.6 billion in cash payments to borrowers whose homes were in some stage of foreclosure in 2009 and 2010. The regulators said they halted the process to ensure speedy relief to struggling borrowers. But the abrupt end to the foreclosure review has raised concerns in Congress. A draft of a Government Audit Report faulted regulators for a poorly designed review process and questioned the independence of private consultants, according to the New York Times.
The Senate Banking Committee will be holding a hearing this Thursday on the role of independent consultants. -- Written by Shanthi Bharatwaj in New York.