A billion dollars in checks sent to foreclosed homeowners as part of a national settlement with big banks is going uncashed, another sign that the government’s much-criticized effort to redress mortgage abuses is coming up far short of its promised impact.
While the agency in charge of dispersing the funds has not specified how many individual checks make up that $1 billion total, the fact that recipients are not bothering to deposit the funds reinforces criticisms of the program. It distributed 4.2 million checks, which expire after 90 days. The vast majority of those checks were for just $300 each. Yet a review by the Independent Foreclosure Review (IFR) suggested that almost a quarter million Americans lost homes under false or illegal pretenses and that about 1.2 million borrowers had had to defend against wrongful foreclosure efforts. The IFR, part of the much-derided 2012 National Mortgage Settlement, has long been faulted for protecting the mortgage industry and for distributing checks for hundreds of dollars to homeowners who owed hundreds of thousands to abusive lenders. The uncashed checks account for a bit less than a third of the money allocated for the IFR program under the 2012 deal with financial firms.
The IFR’s review was quashed by a subsequent settlement amid sharp criticism from consumer activists that the review process was being warped into a coverup of bank and servicer misdeeds. Regulators explained their refusal to share details of industry abuses by saying those practices are “trade secrets” and that revealing them would hurt firms’ competitiveness.
The latest evidence of stumbling in the government’s efforts to do something about foreclosure abuses comes as the industry continues to prey upon borrowers. Authorities fielded about 60,000 official complaints in just six months about bank actions that violate the mortgage settlement, the independent monitor reported in June. Also last month, Bank of America was caught using sales tactics that are supposed to be illegal in its solicitation mailers. And individual horror stories about wrongful foreclosures continue to crop up around the country.