Relief checks issued as part of a multibillion-dollar settlement over foreclosure abuses have bounced, an unfortunate twist for consumers who have been already caught up in problems over reviews of troubled mortgage loans.
Months after brokering a $9.3 billion settlement with the nation’s biggest banks, the Federal Reserve and the Office of the Comptroller of the Currency announced last week that 1.4 million checks would be sent out to struggling homeowners, many of whom have been languishing for two years without assistance.
But problems have emerged again in what has proved to be a deeply flawed review of foreclosures and ensuing settlement. The Federal Reserve and the Comptroller’s office said on Wednesday that some homeowners were greeted by startling news: their checks bounced because of insufficient funds.
The regulators said Wednesday that the problems had been rectified and that consumers should now be able to cash the checks. In January, the banking regulators scuttled a sweeping review of millions of troubled loans in favor of a broad settlement. A central part of the pact was the distribution of $3.6 billion in cash relief to injured homeowners. The first round of checks, distributed by Rust Consulting, were sent out last week, according to the regulators.
The bounced checks is the second hiccup in the process which has been marred by delays. Authorities initially planned to release payments to roughly 4.2 million homeowners at the end of March, but the relief was pushed back because of a temporary delay, according to several people briefed on the matter.
On Wednesday, the Federal Reserve said that Rust Consultant had rectified the problems.
“Some early recipients of checks informed the Federal Reserve’s consumer helpline on Tuesday that they were told their checks could not be cashed,†the Fed said in a statement.
James Parks, a senior executive at Rust Consulting apologized for the delay. “We apologize to anyone who experienced problems trying to cash their checks,†he said in a statement Wednesday.
He also assured homeowners that the checks were valid.
