Independent Foreclosure Review Settlement – $3.3 Billion Earmarked for Consumers
***For an update on the IFR program, please read our more recent post from April 3, 2013.
The latest $8.5 billion foreclosure settlement with 10 mortgage servicers has been heavily criticized since it was announced last week. Many consumer groups believe that the settlement does not go far enough to rectify the damage that the banks caused, which is true – $8.5 billion does not cover the trillions of dollars in home equity that were lost throughout the crisis. Meanwhile, banking industry supporters point to the lack in qualified Independent Foreclosure Review candidates as vindication that banks really did nothing wrong, as noted in this Forbes article.
The truth is, there was wrongdoing at the hands of the banks – we are a nation of laws, and the procedures and rules that banks have in place for struggling borrowers were not followed. Robo-signing and predatory lending are not mere “technical violations” when it results in someone losing their home. That compensation be available to consumers whose housing issues were exacerbated by fraudulent foreclosure practices is a small step in the right direction.
The settlement specifics include a $3.3 billion portion that will be distributed to more than 3.8 million consumers who were pre-qualified for the expired Independent Foreclosure Review (IFR) program – that’s $3.3 billion that will be sent out directly to homeowners. We are fully in support of consumers receiving $3.3 billion dollars. We also support the idea that the settlement will be distributed quickly – the Office of the Comptroller of the Currency (OCC) and Federal Reserve Board announced that they expect to have a payment agent contact all eligible consumers by the end of March. This ambitious timetable greatly differs from all previous relief programs, which were often criticized for having lengthy, biased review processes that were mired in red tape.
In the days going forward, more details will emerge on how the settlement will work, including how the additional $5.2 billion in mortgage relief will be disseminated to those in need. Recently it was reported that payouts for those who qualify for IFR compensation will average around $15,000, with those who were most harmfully affected receiving closer to $125,000. We know first-hand how much this money means to people as we speak with thousands of financially strapped consumers around the clock, 365 days a year.
At the end of the day, the IFR foreclosure settlement is another tool available to distressed homeowners who were wronged. The OCC and Federal Reserve Board deserve credit for taking time to adjust the broken IFR program and revamp it in a way that will reach more consumers and at a faster pace than before.