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|Great Article - Another Way Foreclosure Impacts Borrowers
Yet another way foreclosure has left a bad taste in the mouths of borrowers:
During the worst of the
economic crisis, many borrowers became in danger of losing their homes to foreclosure. Oftentimes, those who attempted to speak to their lenders found them evasive, and that’s if they could reach them at all. Moreover, many lenders began making mistakes with the foreclosure documents, thereby resulting in even more chaos. There were even instances where homes were foreclosed on in error.
This made an already bad situation even worse, as the economy suffered through its most trying times since the Great Depression.
In 2011, the Independent Foreclosure Review was launched to attempt to find a way to compensate homeowners who were negatively impacted by blatant big bank mistreatment. The two agencies spearheading the reviews were the Office of the Comptroller of the Currency (OCC) and the Federal Reserve. In November 2011, eight consultants were named to carry out the monumental task of reviewing as many as 4.5 million home loans.
Their findings would determine whether or not each homeowner was the victim of big bank abuse and, if so, how much the homeowners would be compensated. If the borrower suffered “financial injury” they would receive a check for up to $125,000.
Then, something unforeseen happened. Regulators discovered the entire situation was in such a state of disarray they felt it best to deviate from the initial plan. So instead of trying to figure out each borrower’s level of “financial injury,” it would be easier for the government to issue checks to everyone whose homes went into foreclosure – whether they’d been wronged or not.
The regulators then had to put each of the nearly 4.5 million homeowners into categories to determine the amounts of their checks.
Now the results are in … and for most homeowners the end result is underwhelming. For about three million borrowers, their payback is not nearly enough to cover years of frustration and worry. Those whose modification request was approves (1.1 million) will get $300-$500. The 0.9 million whose modification request was denied will get $1,000-$6,000. Those whose modification request was received but no underwriting decision was made will get $400-$800. Another 0.9 million will receive $300-$600 because the servicer did not engage the borrower in a loan modification or other loss mitigation action. Finally, the last two categories (less than 0.4 million combined) are for “other” loans, resulting in payouts that vary from $300 to the maximum $125,000.
To add insult to injury, many who have tried to cash these checks are finding even more disappointment – when they are told their checks are being rejected. Meanwhile, the Federal Reserve says that “early problems with some checks have been corrected” and the funds are now available.
- Article courtesy of the "Credit Card Builders" premium newsletter