Recently a few clients received a check from their current or former mortgage lender. Perplexed by this, my clients were a bit hesitant to run down to the bank to cash it. They asked “what is this for?” and “are there terms attached to this check I should know about?”
I directed them to a deal struckback in January of this year between Fannie Mae and the ten major banks to settle allegations that the banks had wrongfully foreclosed on thousands of homeowners between 2009 and 2010. The result of the deal was an $8.5 billion settlement which was to be allocated among the homeowners (or now former homeowners) who were wrongfully or prematurely foreclosed on or denied a loan modification resulting in foreclosure. The foreclosures which are considered as wrongful include those which were “robo-signed” or automatically entered into foreclosure proceedings without proper review for work out options such as modification, deed-in-lieu, or short sale.
The settlement amounts range anywhere from $100 to $125,000 per qualifying person. The settlement is thought to be disbursed among hundreds of thousands of people. There is no way in which to apply to be a part of the payout, the recipients of the settlement are to be determined by the banks. The settlement has been criticized by many for being too soft on the banks as it releases them from their responsibility for these foreclosures for a relatively low price.
The first wave of checks were mailed out this week, so if you fit the description of a person who was wrongfully foreclosed on or attempted to be foreclosed on between 2009 and 2010, and you find yourself with a check in hand from your former or current mortgage lender, go ahead and cash it, there are no special terms attached to it, it is simply your pay out from a billion dollar settlement you probably didn’t know you were a part of.
I’ll leave you off with some advice from my Grandma: “Don’t spend it all in one place!”