Paul Kiel, reporter, ProPublica
BY MARIE ANDRUSEWICZ -- Millions of foreclosed upon homeowners expecting relief from banks after the housing crisis are now getting checks from a federal settlement. Unfortunately, some of those checks are as small as $300.
An investigation by ProPublica shows that the program was quietly terminated and the government decided instead to just cut checks to homeowners regardless of the degree to which the housing crisis affected them.
“It didn’t work because they relied on consultants that the banks themselves hired,” says ProPublica reporter Paul Kiel. “They admitted to the fact that they underestimated how complex this process would be.”
Kiel says that advocates never liked the process because there was no transparency. Not only that, it went on for years.
“The process was started in 2011,” says Kiel. “By early 2013 it was still going so (the banks) decided to settle. They said ‘this didn’t work, we’re going to send checks out to people whether they were harmed or not.’”
Adding to the confusion, according to the Propublica report:
The categories (of compensation) are broken down into types of “possible servicer error,” but all possible servicer errors are not created equal in regulators’ eyes. For instance, a borrower who was denied a loan modification and lost her home to foreclosure (a pool of about 370,000 borrowers) will receive $3,000 or $6,000, depending on whether she submitted a complaint. But in cases where the borrower applied for a modification, and the servicer never made a decision and then foreclosed (196,000 borrowers), the payment could range from $400 to $800. If the servicer never even began the modification process and foreclosed (568,000 borrowers), the payment ranges from $300 to $600.
Nonetheless, Alys Cohen of the National Cosumer Law Center says “people who suffered servicer neglect clearly are not getting compensation for the harm they suffered.”