Lucky few Floridians get $125,000 from foreclosure settlement, most to get $300

This article was originally written By Kimberly Miller for The Palm Beach Post and republished in South Florida Law Blog.

The first wave of checks to 4.2 million borrowers, including hundreds of thousands in Florida, will go into the mail Friday, according to the Office of the Comptroller of the Currency and Board of Governors of the Federal Reserve System.

Tuesday’s announcement was the first time bank regulators released information on how the money, which is part of an agreement replacing the failed Independent Foreclosure Review, will be doled out. Everyone who was in foreclosure during 2009 or 2010 with loans serviced by 13 lenders named in the settlement is eligible for payments ranging from $300 to $125,000.

About 2.3 million borrowers will receive the minimum $300, but checks vary depending on borrower experience. For example, borrowers who had a home repossessed after successfully completing a trial loan modification could get $50,000.

The 1,135 borrowers receiving the maximum amount were mostly homeowners who went through foreclosure even though they were protected by the 2003 Service members Civil Relief Act. About 50 borrowers will get $125,000 each for losing their homes when their loan was not in default.

Critics of the program say the amounts were awarded haphazardly. In many cases, homeowners who applied through the original Independent Foreclosure Review received double the amount of money as people in the same situation who didn’t apply.

Also, up to $500 is being awarded to homeowners in a category called “modification request approved.“This is a completely nonsensical process,” said South Florida foreclosure defense attorney Roy Oppenheim. “It’s like winning the lottery.”

Office of the Comptroller of the Currency spokesman Bryan Hubbard said borrowers who applied to the original program got a bigger payout because they were expecting an independent consultant to review their case.

“The regulators determined that these borrowers should be compensated at a higher rate to acknowledge the efforts they made to request a review,” Hubbard said.

Just 500,000 borrowers of the 4.2 million who are eligible had applied for a review by Jan. 1 — a deadline that had been extended twice before.

As of late September, just 3.8 percent of Floridians who were sent letters about the foreclosure review had applied. In Palm Beach County, 50,599 residents were sent letters explaining the program, with just 1,954 responding.

“The concern that some compensation will go to borrowers who did not suffer harm as a result of servicer errors is understandable, but it overlooks the fact that each of these borrowers was part of a process that was far more deficient than any of us should be willing to accept,” said Comptroller of the Currency Thomas Curry during a Women in Housing and Finance meeting in February.

Nova Southeastern University law professor Robert Jarvis agrees, noting that many borrowers were put into predatory loans that banks should have known were unaffordable.

Still, he said the Independent Foreclosure Review and the current settlement are “the worst possible”processes to compensate borrowers.

“There were so many people, and the files were so lacking information, the original system was a Herculean task,” he said. “The government should have said, ‘We’re not doing a review, we’re telling you what you have to pay and we’re going to take you to within an inch of your financial life.’”

Minneapolis-based Rust Consulting was contracted by federal regulators to disburse the money.

Consumer advocates are trying to make homeowners aware the checks are on their way, fearing they will throw them out by accident. Rust Consulting mailed postcards to eligible homeowners last month alerting them that a check of an unknown amount was forthcoming.

Riviera Beach resident Dorothy Meriweather got the postcard but thought it might be a hoax. Bank of America filed for foreclosure against the 65-year-old in 2010, but she said no one ever told her she was eligible for money.

“They gave me no indication that I would be reimbursed for anything, and I still don’t really understand,” Meriweather said. “I thought the card was a scam or something.”

Real estate attorney and foreclosure defense attorney, Roy Oppenheim left Wall Street for Main Street, founding Oppenheim Law along with his wife Ellen in 1989 in Fort Lauderdale, Florida, and is vice president of Weston Title and creator of the South Florida Law Blog, named the best business and technology blog by the South Florida Sun-Sentinel. Follow Roy on Twitter at @OpLaw or like Oppenheim Law on Facebook.