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!”
