IFR: Problems Grow, Lawsuit Next?

If you’re one of the millions of homeowners who entered into an agreement for a cash settlement, two years after bank regulators took their initial “enforcement” action against mortgage servicers in the laughable (and now defunct) Independent Foreclosure Review, there’s a good chance you’ve had a bellyful. And if you have, you’re not alone. This scandal is now nothing short of an embarrassing crisis.

IFR and Rust

Rust Consulting, which is the agency that’s handling the payouts for the IFR agreement, has made a huge mess with it. The checks were late getting out, when consumers began receiving them, often, there were just pennies on the dollar of what they were promised. The first batch of checks actually bounced – leaving some consumers in even more financial problems because they began paying bills, only to learn the checks were no good. Now, the agency just owned up to sending out erroneous checks. On Wednesday, a spokesperson for the company said that more than 40 percent of checks mailed on May 3rd were less than the amount designated by bank regulators because of a “clerical error.” Folks are angry and at this point, some have decided that it’s not going to be made right until and unless lawyers are brought in to protect their interests.

No Problmes?

These checks were mailed to close to 100,000 borrowers whose mortgages were with either Goldman Sachs or Morgan Stanley. Another 217,000 checks mailed the same day, but that weren’t part of those two lenders, should have “no problems” – depending on how you define that.

Rust said it’s already corrected the error and will be mailing the correct checks. It just might be a few weeks before it gets around to it. In its press release, it said,

A letter explaining the reason for the supplemental check will accompany the supplemental check.

It also said it’s listed on the Federal Reserve Board’s website the revised payment amounts. The only problem with that is the homeowners have yet to be told exactly which category they fall into. If it weren’t so devastating, it’d be funny. Between the banks and now this third party, consumers are reaching the boiling point.

When the first batch of checks were sent out, only to have consumers learn the checks were no good, everyone thought that it couldn’t get any worse. But it did. Remember, this is the compensation for the wrongful foreclosures and robo signing that rocked the banking word a few years ago. The Federal Reserve said it would be closely monitoring the payments and encouraged borrowers who had concerns or experienced difficulties cashing their checks to contact Rust. Another interesting dynamic, one of which, as it was soon learned just how quickly a company could crack under the stress when millions of consumers are trying to call you at the same time.

A Dozen Banks

More than 4 million homeowners were affected between the years 2009 and 2011 and it wasn’t just one or two banks that was in on the illegal activities (and certainly unethical). More than a dozen big banks, their affiliates and third parties all played a role. From Wells Fargo to Bank of America to Goldman – seems as though there wasn’t a single bank that didn’t take advantage of its customers.

As of today, Rust has mailed payments to more than 3.9 million borrowers totaling approximately $3.4 billion. Clearly, accuracy in what it sends out isn’t necessarily a priority. That could change, though. Words like “lawsuit” and “class action” are being whispered.

The anger is justified, frankly as the majority of folks receiving the checks amount to a few hundred dollars. As one spokesperson for a consumer group explained,

The payouts fall vastly short when truly accounting for the wrongdoing by the named banks and their servicers.

Our Readers

Many of our readers are also taking to social media, message boards and emails to us. Many of these IFR victims say the time has come for legal action. One of our readers emailed us late this afternoon, Kyle received a check today,

for $4,050 but I was told I was in the category that pays $50,000. It’s time to bring in the lawyers and begin considering our options as a group.

Another reader said she received a replacement check for the one that was no good, only to take it to the bank and find out it too was no good.

As part of the agreement, borrowers do have the option for lawsuits in order to secure compensation. Already, some are saying there’s blood in the water. Whether it’s the banks, the government or Rust Consulting, these consumers are determined to ensure the wrongs have been righted and they don’t care who makes it right – as long as it’s done per the terms of the agreement.

The frustration is understandable. Most were qualified to receive payouts ranging between $3,000 to $50,000 after servicers failed to convert them to permanent mortgage modifications. The homeowners went through the convoluted process, provided everything that was asked of them and still, they believe they were deceived. In fact, even those who were expecting less than $5,000 were still only receiving around $300 – it makes one wonder how they’re going to handle the batch of checks that go out in the $50,000 range.

It could be that will be the straw that breaks the camel’s back. And make no mistake: being misled, being given worthless checks, given the runaround, forced to step back and witness the blame game – it’s taken a toll on even the most patient borrower. Many are no longer even sure they were categorized right and if they were, what their checks will look like – especially considering the ones already sent aren’t anything close to what they were supposed to be. Looks as though their patience will be put to the test yet again.

How do you think this should play out? Are you waiting for your settlement? Share your stories with us – we want to hear what you have to say and whether you’d consider joining a class action lawsuit.

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