OCC Follies: Troubled Borrowers Get Shafted Yet Again
Rust Consulting, which handled the borrower mailings during the Independent Foreclosure Review and is now acting as paying agent, continues to screw up in every way imaginable.
Recall that Rust and the servicers were criticized by the GAO for producing borrowers outreach letters that were written well over the head of the average American and were deemed by the GAO to have made inadequate efforts to reach borrowers eligible for a review. After the settlement was reached in embarrassing haste and payments were determined in an arbitrary manner, Rust sent out checks that in many instances bounced. Rust also has made it cumbersome for recipients to provide current addresses (readers have reported receiving changing instructions, and apparently taking their lead from servicers, not processing completed forms). And we’ve wondered whether this incompetence is by design, since Rust’s current owner, private equity powerhouse Apollo, has deep ties to the residential real estate industry, and the firm is being sold to the venture capital arm of Citigroup.
The latest blunder: Rust sent out checks that were too small to some eligible borrowers. The Fed put out a press release with the not-exactly-forthcoming headline “ Federal Reserve provides additional information on borrowers whose mortgages were serviced by Goldman Sachs and Morgan Stanley” (Deontos):
Some borrowers whose mortgages were serviced by Goldman Sachs and Morgan Stanley and who were already sent a check as part of the Independent Foreclosure Review payment agreement will be sent an additional payment around May 17, Rust Consulting announced Wednesday . The payments are being made to correct an error by Rust Consulting, the paying agent, when the original payments were sent last week.
As Rust Consulting has announced, approximately 96,000 borrowers whose loans were serviced by the former subsidiaries of Goldman Sachs (Litton Loan Servicing LP) and Morgan Stanley (Saxon Mortgage Services, Inc.) were sent checks for less than the payment amount that the Federal Reserve directed Rust to pay. The new checks will make up the difference between what was in the original check sent by Rust and what should have been paid. Borrowers should cash both the original checks and the supplemental checks.
The notice indicates that the 96,000 affected borrowers were out of a total of 217,000 who were set to receive payment from the two servicers.
The New York Times wrote up the incident. Unfortunately, it conflated the Rust error with the by-design inadequate payments:
What’s more, some homeowners complain the problem is broader than Rust has acknowledged. Jennifer Lawson, whose husband is on active duty with the Navy, said she was stunned when she received a check on April 19 for $600. Under the terms of the settlement deal, Ms. Lawson expected thousands of dollars in compensation for her foreclosure.
“First we are wrongfully tossed out of our home while serving this country and then we get basically no money,” Ms. Lawson said.
The problems have alarmed Capitol Hill and prompted investigations into the settlement.
“This is the worst settlement I have seen in my life,” said Representative Elijah E. Cummings, a Democrat from Maryland, who has opened an investigation into problems with the settlement, including the use of Rust.
As NC readers who’ve read the comments section on our posts on the IFR know, the overwhelming majority people who received checks deemed them to be too small. They either felt they were eligible for payment under a category with a bigger amount attached or found their payment to have no relationship to the sort of damage they’d suffered. And that is not a mistake.