When the federal government ordered lenders to review foreclosures for irregularities in response to the robo-signing scandal, a few analysts raised their eyebrows; surely the expense of the audits would be prohibitive, they thought. Turns out, they were right.
While the review seemed like a good idea at the time, in practice it has proved unmanageable. Consultants benefitted, banks and mortgage servicing companies continued to write checks, and consumers — the victims of the wrongful foreclosures — waited patiently for their payout.
One by one, the lenders have modified the terms of the agreement with the government, opting to halt the file-by-file review and, instead, to distribute cash payments to borrowers now. This week, the Federal Reserve announced that GMAC Mortgage has joined the ranks. Chances are good that a few Maryland borrowers will be happy to hear the news according to a Montgomery County Maryland nonprofit bankruptcy lawyer.
GMAC is a unit of Residential Capital LLC, a lender that filed for bankruptcy in 2012. The bankruptcy court has approved the change in plans.
To qualify for payments, borrowers must have been in foreclosure between 2009 and 2010. Nationwide, the Fed said, the number tops 232,000. In all, GMAC will distribute $230 million in cash to borrowers based on what the Fed terms “categories of harm” like the loss of a home or some kind of financial loss.
In all, now, the revised settlement means lenders will be paying almost $4 billion to 4.4 million borrowers. The bucks don’t stop there, though: Lenders (and mortgage servicers) will also pay $5.8 billion in other ways, including through loan modifications and deficiency judgment forgiveness.
Source: Baltimore Sun, “GMAC Mortgage to pay $230 million as part of foreclosure review,” Timothy Ahmann and Karey Van Hall, July 26, 2013