Rust Consulting Inc. will begin sending $125,000 checks to 1,135 borrowers deemed most harmed by botched foreclosures in 2009 and 2010 that led to a $9.3 billion settlement between regulators and U.S. mortgage servicers.
The consulting firm is distributing $3.6 billion that servicers including JPMorgan Chase & Co. and Bank of America Corp. agreed to pay to settle claims they improperly seized homes in the wake of the subprime mortgage crisis, according to a statement from the Office of the Comptroller of the Currency and Federal Reserve.
Payments will begin to go out April 12, with as many as 90 percent of more than 4 million affected borrowers expected to receive their checks this month, according to the regulators. The agencies expect the process to extend into mid-July, and they are still working on payments to borrowers from servicers that had been affiliated with Goldman Sachs Group Inc. and Morgan Stanley.
Those at the top of the scale for potential harm will receive $125,000, and the 2.6 million categorized at the lowest of 11 rungs of potential harm will get $300, the regulators said. The remainder of the settlement money from the 13 servicers who signed on is meant to be used to prevent future foreclosures.
After a rash of botched foreclosures during the previous decade’s housing-market collapse, an earlier 2011 settlement called for the servicers to hire outside consultants to review the cases one-by-one and compensate borrowers based on actual harm. After the process was beset by delays, those reviews were mostly scrapped in the current settlement, which is meant to give some level of payment to every borrower who went through foreclosure during the two-year period.
The Government Accountability Office said in a report released last week that insufficient guidance from the OCC and Federal Reserve slowed down the earlier review process. A Senate subcommittee will examine the relationship between regulators and outside consultants in an April 11 hearing.