By Vicki Needham - 04/25/13 05:37 PM EDT
Nearly $3.6 billion is going out to about 4.2 million borrowers but many of the first checks issued earlier this month could not be cashed.
The Federal Reserve Board said it has rectified the situation for getting out the payments that are expected to range from $300 to $125,000 and are being paid from 11 mortgage servicers as part of a January agreement reached by the Office of the Comptroller of the Currency and the Federal Reserve.
In the process of working out the settlement, regulators eliminated the Independent Foreclosure Review (IFR) program that was designed to examine millions of loan files and determine the amount due to each homeowner.
Regulators have argued that the process, set up in 2011, was painstakingly slow and the money wasn't getting to homeowners fast enough.
The measure would give President Obama the power to appoint a monitor who would review compliance of the banks and the regulators and issue public quarterly reports to Congress.
The reports would include a broad range of data including information on borrowers who receive relief and how much they were paid, as well as the number and amounts of principal loan modifications and other types of borrower assistance.
In January, Cummings and Sen. Elizabeth Warren (D-Mass.) launched a joint investigation of the settlement and requested that the Fed and the OCC provide documents relating to illegal actions by mortgage servicers identified during the IPR.
The lawmakers say the regulators have refused to provide those documents, because they argue that they are the “trade secrets” of mortgage servicers.
House Financial Services ranking member Maxine Waters (D-Calif.) also has been at the forefront of investigating why regulators decided to nix the IPR without consulting Congress.
In an April 4 report, the Government Accountability Office said of the IPR that: “Complexity of the reviews, overly broad guidance, and limited monitoring for consistency impeded the ability of the Office of the Comptroller of the Currency (OCC) and the Board of Governors of the Federal Reserve System (Federal Reserve) to achieve the goals of the foreclosure review.”
The report concluded that “limited communication with borrowers and the public adversely impacted transparency and public confidence” and recommended that regulators “apply lessons from the foreclosure review process, such as enhancing planning and monitoring activities to achieve goals, as they develop and implement the activities under the amended consent orders."
The January agreement provides cash payments to borrowers whose homes were in any stage of the foreclosure process in 2009 or 2010 and whose mortgages were serviced by Aurora, Bank of America, Citibank, Goldman Sachs, HSBC, JPMorgan Chase, MetLife Bank, Morgan Stanley, PNC, Sovereign, SunTrust, U.S. Bank and Wells Fargo.