In January of 2013, the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the Board of Governors of the Federal Reserve Board reached an agreement with 13 mortgage servicers to conclude the Independent Foreclosure Review program. Under this agreement, the servicers agreed to pay a combined $3.6 billion in cash payments to 4.17 million borrowers whose primary residence was affected by a foreclosure process in 2009 or 2010 by one of these servicers.
The parties to the settlement determined payment amounts, and they selected Rust Consulting as third-party administrator (Paying Agent) to implement the terms of the pre-determined consent orders.
Participating mortgage servicers provided Rust with their last-known address for eligible borrowers. Rust sent postcards to every borrower notifying them of their eligibility to receive payment under the agreement. In addition, some borrowers received letters from Rust requesting additional information that was needed to process a particular payment. Whenever correspondence to borrowers was returned as undeliverable, Rust’s actions included the following steps to find that borrower:
- Address search via the National Change of Address (NCOA) registry
- Query of the Social Security Death Index
- Search via standard industry trace tools
- Revalidation of address by original loan servicer
Funds were deposited by the mortgage servicers at Huntington National Bank of Ohio in advance of any checks being mailed, and all interest earned on the funds accrues to the benefit of the fund.
Rust mailed checks to recipients in large waves beginning with 1.4 million checks mailed on April 12, 2013, with subsequent large waves in the following months. In the first 17 days after the initial mailing, 1.2 million settlement checks worth more than $1.2 billion cleared the bank.
Status as of February 2014
As of February 4, 2014, Rust has mailed checks to more than 98 percent of eligible borrowers. Of this total, 3.6 million checks with a value of $3.1 billion have been cashed by borrowers. Within the remainder of cases, approximately 500,000 borrowers have not yet cashed their checks, and Rust continues to work approximately 57,000 special situations such as now-divorced couples requesting a split of funds (these cases require individual legal review), requests for a change of payee such as in the event of a borrower’s death, and checks that were returned as undeliverable.
In a recent analysis of customer contacts, more than 70 percent of people who were contacted regarding their uncashed check provided the same address that Rust had on record. This indicates that a substantial number of checks might have been discarded by borrowers in error.
Form 1099 Mailed to Borrowers
Based on guidance from tax counsel, federal regulators directed Rust Consulting to send Form 1099s to borrowers who received payments as part of the IFR settlement. The forms report miscellaneous income to the Internal Revenue Service. The company encourages borrowers to seek the advice of qualified tax professionals regarding IFR payments.
Some borrowers have said they received their Form 1099 but have not received their check. Rust uses this event as an opportunity to reissue checks as appropriate to ensure these eligible persons receive their settlement funds.
1099 forms were mailed whether the associated check was cashed or not. This is in alignment with IRS reporting guidelines, which say that tax obligations – if any – do not require that a recipient has actually cashed a check.
ASSISTANCE FOR BORROWERS
Borrowers with questions regarding their payment should contact the Paying Agent — Rust Consulting. Information provided to Rust will only be used for purposes relating to the agreement.
- Customer Service Center Phone: +1 (888) 952-9105
NOTICE TO FINANCIAL INSTITUTIONS
Financial institutions processing checks are reminded that to help prevent fraud, checks require positive identification. Banks and other financial institutions should follow the instructions provided on the back of the check to validate authenticity.