Payments to 4.2 million borrowers will begin on Friday following an agreement reached by the Office of the Comptroller of the Currency and the Federal Reserve Board with 13 mortgage servicers tied to the independent foreclosure review settlement.
The agreement will provide $3.6 billion in cash payments to borrowers whose homes were in any stage of foreclosure in 2009 or 2010 and whose mortgages were serviced by one of the following companies, their affiliates, or subsidiaries: Aurora, Bank of America, Citibank, Goldman Sachs, HSBC, JPMorgan Chase, MetLife Bank, Morgan Stanley, PNC, Sovereign, SunTrust, U.S. Bank and Wells Fargo.
The payments will range from $300 to $125,000. The OCC and Federal Reserve said Tuesday that payments will be sent out in waves with the first 1.4 million checks totaling $1.2 billion going out this week. By the end of the month, about 90% of the cash payments will be sent with the final wave ending in mid-July.
For borrowers whose mortgages were serviced by 11 of the 13 servicers - all servicers but Goldman Sachs and Morgan Stanley. Information about payments to borrowers whose mortgages were serviced by Goldman Sachs and Morgan Stanley will be announced soon.
Regulators also released details about how it broke down payments for each borrower and how many people fit into each category — a question raised repeatedly since the agencies announced the settlement earlier this year.
Based on the chart released by regulators Tuesday, more than 60% of the affected borrowers, or 2.4 million, will receive the lowest amount of $300. Only 1,135 borrowers are receiving the maximum amount. In determining the payments, borrowers were categorized according to the stage of their foreclosure process and the type of possible servicer error.
In most cases, borrowers will receive a letter with an enclosed check sent by the Paying Agent - Rust Consulting Inc. Some borrowers may receive letters from Rust requesting additional information needed to process their payments. Previously, Rust sent postcards to all borrowers notifying them of their eligibility to receive payment under the agreement. Rust is sending all payments and correspondence regarding the foreclosure agreement at the direction of the OCC and Federal Reserve.
Regulators then determined amounts for each category using the financial remediation matrix published in June 2012 as a guide, incorporating input from various consumer groups.
Regulators have published the payment amounts and number of people in each category on their Web sites at www.occ.gov/independentforeclosurereview and www.federalreserve.gov/consumerinfo/independent-foreclosure-review-payment-agreement.htm.
Accepting a payment will not prevent borrowers from taking any action they may wish to pursue related to their foreclosure. Servicers are not permitted to ask borrowers to sign a waiver of any legal claims they may have against their servicer in connection with accepting payment.
While the agreement ended the Independent Foreclosure Review for the 13 companies identified above, the review continues for OneWest, Everbank and GMAC Mortgage.
Regulators continue to monitor the servicers' actions to correct the unsafe and unsound mortgage servicing and foreclosure practices required by other parts of regulators' enforcement actions, which remain in effect. Regulators have issued guidance to the servicers under foreclosure-related enforcement actions directing a review before foreclosure sales for all pending foreclosures.