It’s a classic case of adding insult to injury. Big banks that engaged in wrongful foreclosure practices have finally gotten around to sending checks to compensate homeowners for at least some of the harm they suffered. But the checks bounced!
In the San Antonio area and nationwide, foreclosure has affected an almost unimaginable number of homeowners since the real estate crisis triggered the Great Recession. Some of them have made strategic decisions to file for bankruptcy, seeking to keep their homes that way.
Across the country, millions of people were wrongly foreclosed upon. The banks and their loan servicers failed to comply with numerous legal requirements. Famously, in the so-called “robo-signing” scandal, they used bogus paperwork or no paperwork at all.
The banks also charged improper fees and engaged in the dubious practice of “dual tracking.” Using this practice, they often accepted modified mortgage payments for awhile from homeowners suffering from job loss or other financial problems. But then the banks double-crossed the homeowners by continuing to pursue foreclosure anyway.
State attorneys got together and sued the banks over these wrongful foreclosure practices. The federal government joined in, and in February 2012 five of the nation’s biggest banks agreed to a $25 billion settlement.
About a year later, a total of 13 mortgage companies agreed to a separate settlement. This one was in the amount of $9.3 billion, and it was supposed to provide $3.6 billion in compensation to about 4.2 million homeowners who were wrongly foreclosed upon. The payment will range from $300 to $125,000.
Last week, the first round of payments went out to homeowners. But here’s the rub: some of the checks bounced. The private contractor chosen by the federal government to distribute the money apparently failed to transfer enough money into the appropriate bank accounts to cover them.
Source: New York Times, “Mortgage Relief Checks Go Out, Only to Bounce,” Jessica Silver-Greenberg and Ben Protess, April 17, 2013.
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