More than four million Americans will be watching their mailboxes over the next few weeks, and not just for their tax refunds. Starting today, checks are on the way to victims of wrongful foreclosures as part of a $3.6 billion settlement between banks and federal regulators. But for most of those borrowers, it won’t exactly be Christmas in April. More than 80 percent of people who are eligible for settlement money will get checks ranging from $300 to $1,000.
“Makes me laugh out loud," says Josh Escobedo, of Spanish Fork, Utah. "It’s kind of a punch in the face.”
Escobedo fell behind on his mortgage payments after he lost his job as a realtor. He was denied a loan modification at first and says it cost him a lot to get one through an attorney.
“Somewhere in the $8,000 range, at least, not to mention all the time and energy and the stress on my family,” he explains. Escobedo says his check might cover a nice steak dinner for him and his wife.
The settlement is the result of a long push by federal regulators to compensate borrowers for mistakes or mistreatment by banks at the height of the housing crisis.
53 people lost their homes, but never actually defaulted on their mortgages, and banks took houses away from more than a thousand military service-members who were protected from foreclosure by law. Borrowers in those two groups will get up to $125,000 each, but most people will get a small fraction of that.
“Servicers are not paying anywhere close to the amount of harm they caused,” says Alys Cohen, an attorney with the National Consumer Law Center. “On the other hand, there’s still a chance for servicers to do the right thing and give people loan modifications when they qualify.”
In West Palm Beach, Florida, Claudia Fehribach fought to get a modification after her husband lost his job. They have a 10-year-old son, and in the end, they were able to keep their home, but she says the process took three years.
“I don’t know how many nights I lost sleep with my husband worrying what was going to happen,” says Fehribach. “I’m glad I’m getting something, don’t get me wrong, but it’s ridiculous. It really is.”
Federal regulators say borrowers should call Rust Consulting to find out if they’re eligible for the settlement. The company is distributing the money, and sent a postcard to every person who’ll get a check. Fehribach says the notice looks like junk mail, and she almost threw hers away.