As part of a settlement with federal regulators, 13 lenders this week are to begin paying $3.6 billion to more than 4 million troubled borrowers whose homes were in foreclosure proceedings in 2009 and 2010.
A chart released Tuesday by the regulators showed most of the borrowers would receive $300, the minimum allowed under the settlement terms. The maximum of $125,000 was to be paid to 1,135 borrowers whose homes were seized while they were serving in the military or were current on their payments.
The settlement replaces a failed process in which bank regulators required large providers of mortgage customer service to hire consultants to audit foreclosures from 2009 or 2010 for wrongdoing.
The process proved so costly and time consuming that it was called off and the independent auditors were replaced by the general settlement -- a debacle that has drawn criticism from advocacy groups and others.
“The independent auditors should be asked to return some or half of the $2 billion that they charged to audit for nothing,” said Faith Bautista, president of the National Asian American Coalition.
Bautista, who lost her own home to foreclosure in 2009, called the payments "grossly inadequate."
The agreement is separate from a $26-billion settlement that the five biggest mortgage servicers reached to put an end to foreclosure-abuse investigations state attorneys general, the U.S. Justice Department and the U.S. Department of Housing and Urban Development.
Payments from 11 of the 13 mortgage servicers are to be sent by the end of July. The payment schedule for the other two servicers -- Wall Street giants Morgan Stanley and Goldman Sachs -- weren't yet available, the regulators said.
The first wave of checks, totaling $1.2 billion, is to be sent Friday, with 90% of the payments to be made by the end of April, according to the Federal Reserve and the Office of the Comptroller of the Currency, the Treasury Department agency that regulates national banks.
Another wave of payments, contingent on additional information from borrowers, will go out in mid-July, the Fed and OCC said. Those last payments, along with those from Goldman Sachs and Morgan Stanley, would bring the number of check recipients to about 4.2 million.
The banks also agreed to provide $5.7 billion in foreclosure-prevention aid as part of the settlement, bringing the total relief to $9.3 billion.
“We’re focused on giving consumers relief as soon as possible,” OCC spokesman Bryan Hubbard said in a telephone interview.
Payments will be handled by an outside firm, Rust Consulting. Borrowers can call Rust at (888) 952-9105 to update their contact information or to verify that they are covered by the agreement.
Information provided to Rust will only be used for purposes related to the agreement, the regulators said. They warned borrowers to beware of scams and anyone asking them to call a different number or to pay a fee to receive payment under the agreement.
Accepting a payment will not prevent borrowers from pursuing additional legal action against banks. The servicers are not permitted to ask borrowers to sign a waiver of any legal claims.