By Senior Correspondent Desirée Taylor
Four million borrowers across the United States who may have been wrongfully foreclosed on during 2009 and 2010 can get a share of the $3.6 billion settlement between federal regulators and 11 banks. In New Jersey, more than 100,000 people are eligible. But most Americans won’t get a huge payment.
“The compensation ranges between $300 and $125,000,” said Beverly Brown Ruggia, community reinvestment organizer for New Jersey Citizen Action. “Effectively it doesn’t come to much compensation at all for people who lost their homes. But it does not mean that those people don’t have other legal recourse.”
Among the Americans who lost their homes were more than 1,000 military personnel who will likely receive $125,000. The low payments of $300 to $1,000 will typically go to borrowers who weren’t offered help by the banks, or were placed into foreclosure even after they asked for help.
“It’s certainly not adequate,” Brown Ruggia said. “And I believe many people will feel that it’s insulting.”
The settlement represents the banks’ latest step toward eliminating hundreds of billions of dollars in potential liabilities related to the housing crisis that peaked in 2008. Among the abuses was the improper handling of documents, or robo-signing.
“The servicers had people who were not authorized to sign legal documents that are required for a proper foreclosure. And this was done in order to have the foreclosures finalized faster. Fortunately that came to light and in the state of New Jersey there was a freeze on foreclosures until the robo-signing practices were investigated,” Brown Ruggia said.
This practice has stopped, but the moratorium on foreclosures created a backlog, which is the main reason why foreclosures have been on the rise in New Jersey over the past year.
“In the first quarter of 2013, they were up about 50 percent from the same time period a year earlier. And so generally, we’re seeing a faster pace of new foreclosure filings in the state primarily because the state is beginning to catch up with the backlog that resulted from the foreclosure moratoriums back in 2011,” said Otteau Valuation Group President Jeffrey Otteau.
The good news, says Otteau, is that these homes are coming on the market at a time when housing inventory is low.