Monday, July 1, 2013

Failed Foreclosure Fraud/Robosigning Scandal Settlement Reignites Old Feelings Of Anger, Frustration As Victimized Homeowners Continue To Be Left To Fight Battle On Their Own

From a recent USA Today article on the foreclosure fraud/robosigning scandal settlement:

  • The payouts, meant to close the books on an economic catastrophe that staggered millions of American households, have instead reignited feelings of anger and frustration.
  • Regulators initially promised independent case reviews to millions of homeowners involved in foreclosures in 2009 and 2010. They abandoned that pledge this year when they renegotiated the 2011 settlement with the banks, a trade-off they said was necessary to get money in borrowers' hands faster.

    Nearly $3.4 billion has been paid out to 3.9 million borrowers since mid-April. An additional 300,000 or so borrowers will get their payments in the coming weeks.

    The payouts, far from closing the books on an economic catastrophe that rocked millions of households in the worst years of the Great Recession, have instead reignited old feelings of anger and frustration.
  • The renegotiated settlement created a $3.6 billion pot to compensate borrowers for shoddy foreclosure practices that ran the gamut from wrongful foreclosures to lost consumer documents.

    About two-thirds of the recipients received $300 — the smallest possible amount. Fewer than 1,200 got $125,000, the most allowed. The rest fell into one of 10 other categories for compensation, mostly in the $400 to $7,500 range.

    How exactly individual borrowers' compensation was determined is just one of many questions being asked about the settlement's design and fairness. Regulators defined the categories for compensation, set the amounts and laid out the rules for mortgage servicers on how to slot people. Those who fit in more than one category were assigned to the one paying the highest amount, regulators say.

    Some critical details about the settlement remain a mystery to the public and even to members of Congress, including how many foreclosure errors were discovered in a limited number of cases that were actually reviewed.

    "I am deeply concerned by the lack of transparency surrounding this settlement and by the fact that we still have no idea how many illegal foreclosures each bank committed," says Rep. Elijah Cummings, D-Md.

    Sen. Elizabeth Warren, D-Mass., has criticized regulators for allowing companies that allegedly broke mortgage servicing laws to assign borrowers to the various compensation categories for payment. "I just find this one amazing," Warren said at a recent Senate hearing.

    The agreement the government made with the banks leaves consumers little recourse. They cannot appeal their payouts to banks or the regulators. But they can still sue their servicers.
  • Settlement critics question the size of the settlement pot, given that so few reviews were actually done.

    It's impossible to draw any conclusions from the completed reviews about error rates at particular companies, testified Lawrance Evans of the Government Accountability Office at a Senate hearing in April. Not enough reviews were done in a statistically valid way, he said.

    Consumer advocates question how good the actual reviews would have been, given that servicers were paying for them. But they would have provided more insight into foreclosure errors than is known now, housing advocate [Bruce] Marks says.

    The settlement "was going in the right direction. They were going to find harm and provide restitution," he says.

    Instead, just as before the original settlement was announced, borrowers who think they were harmed are left to fight that battle on their own.

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