Bank Fraud Settlement Checks Arrive –Only to Bounce

AMA4-19-13Nearly four years ago, several of the nation’s major banks were caught red-handed in a variety of foreclosure related abuses collectively termed the “robosigning” scandal. And it’s taken nearly that long for the first checks issued in that settlement to reach the victims of wrongful foreclosure and other fraudulent practices. But according to a recent New York Times article, there’s a catch: thanks to still more manipulative practices on the part of a private sector intermediary, those checks are bouncing –leaving the recipients feeling victimized all over again.

The settlement is the result of legal action taken by the attorneys general of all 50 states to prosecute major banks, including such big names as Bank of America, Citibank, JP Morgan Chase and Wells Fargo, for massive abuses arising from the wave of foreclosures spawned by the housing collapse of 2008. In the period after the crash, these and other banks named in the suit were processing masses of foreclosure actions with tactics such as falsifying signatures (hence the name “robosigning”), seizing houses without proper processing, and other fraudulent practices.

The banks settled the case for $3.6 billion, in an agreement that called for victims of their malfeasance to receive a percentage of the settlement. Now, after a three-year wait, the first round of checks were mailed in early April 2013 to 1.4 million former homeowners. But when some of these victims attempted to cash the check at local banks, they were told that the promised funds were not available.

The problem, say legal and housing experts, lies with Rust Consulting, a firm charged with moving the settlement money into an account at Huntington National Bank in Ohio for distraction to the victims n the case. Rust, a frequently used intermediary in class action and government lawsuits, apparently keeps accounts empty as a matter of practice until the end of the day, when it fulfils requests for payment on issued checks.

But although Rust spokespeople insist that the problem has been fixed, and the Huntington National Bank confirms that the funds are really available, the check recipients, having beem burned too many times in the past, remain wary. And with reason – the time delay and other factors may make some checks difficult or impossible to negotiate. In some cases, checks were issued jointly to married couples who have since divorced, or issued to a name the recipient is no longer using.

Because of all the glitches, housing advocates worry that some people won’t even try to cash their checks, fearing a scam. And with payouts averaging $3,000, these checks can make a significant difference to a struggling homeowner.

The outcome of this attempt to impose accountability on major mortgage lenders has ramifications for the entire housing industry and for investors implementing Jason Hartman’s guidelines for creating wealth through income property. It’s said that the wheels of justice grind slowly. For those expecting compensation for wrongfully losing their homes, those wheels seem to have ground to a halt. (Top image: Flickr/modery)

The American Monetary  Association Team

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