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Sorry we foreclosed your home, here’s a settlement check…or maybe not

Several beleaguered homeowners were recently dealt an unfortunate surprise when they attempted to cash the checks issued to them as part of the national wrongful foreclosure settlement - specifically, the checks bounced!

Although it is unclear how many homeowners were impacted by this recent problem, the entire event simply added even more heartache for many homeowners who have already been waiting for months for their share of the multi-billion dollar settlement with national banks.

Foreclosure settlement

This fiasco stems from a 2011 decision in which banking regulators ordered the review of millions of loans for evidence of foreclosure abuse. Unfortunately, this entire review process became mired in problems and delays, leading to the decision to scrap the reviews and complete a settlement with the banks for $9.3 billion instead - of which, $3.6 billion was to be dispersed to homeowners as cash payments and other relief.

The first round of these cash payments - totaling $1.2 billion - were scheduled to be sent to 1.4 million homeowners earlier this month. Included in this first round of checks were 1,082 service members who were subject to illegal bank foreclosures, as well as homeowners whose homes were foreclosed despite never missing a mortgage payment. According to the Office of the Comptroller of the Currency, these two groups were set to receive checks for $125,000.

In addition, several homeowners whose homes were wrongly foreclosed on - but the foreclosures were reversed or never completed - were set to receive checks ranging from $5,000 to $15,000. Lastly, several hundred thousand homeowners were expecting checks for $300 because they were denied a loan modification or other assistance.

Tragically, when several of these homeowners finally received their checks - after months of waiting - they discovered there were insufficient funds to cover the checks. According to a recent report in the New York Times, the debacle may have been caused when the firm hired to distribute the funds to homeowners failed to transfer the $3.6 billion to the correct account after collecting the money from the banks involved in the settlement - merely topping off a process that seems to have been hindered with problems from the beginning.

Bankruptcy can be used to battle foreclosure

Sadly these checks - even the ones that didn't bounce - are simply too little too late for many of the homeowners involved in this recent settlement as they have already lost their homes through the foreclosure process. However, homeowners facing a current foreclosure need to know that they do not have to just sit back and wait for the bank to take away their homes. After all, this recent settlement is further proves that banks are not always in the right.

For example, homeowners who want to fight back against foreclosure can use the bankruptcy process as a means of saving their home. Specifically, by filing for a Chapter 13 bankruptcy a homeowner may be able to save his or her home by setting up a payment plan to get current on his or her mortgage.

However, every homeowner's situation is different as each optimal alternative changes depending on the facts of the situation. Accordingly, if you are currently going through a home foreclosure and believe bankruptcy may be a viable option, it may be advisable to contact an experienced bankruptcy attorney who can help determine what your best options may be given your circumstances.

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  • NACA | National Association of Consumer Advocates
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Goldman & Beslow LLC

Goldman & Beslow, LLC is a Federal Debt Relief Agency by an Act of Congress. We have proudly assisted consumers seeking relief under the U.S. Bankruptcy Code for over 38 years.

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