When homeowners discovered that an account that was supposed to compensate them for foreclosure abuses lacked sufficient money to cash their checks, the consulting firm at the center of the mishap promised that the problem was fixed and that the checks were valid.
Three weeks later, though, that promise fell short.
This time, according to officials briefed on the matter, the consulting firm, Rust, issued a raft of checks with wrong amounts. The mistake, officials said, cheated struggling homeowners out of thousands of dollars.
Federal authorities are ordering Rust, which is based in Minnesota, to fix its mistake, the officials said, though the problems continued as of Wednesday.
Rust did not immediately return calls for comment.
The incident cast a harsh spotlight once again on Rust. Despite a mixed track record, it was selected as the distributor of checks as part of a $3.6 billion settlement deal between federal regulators and the nation’s largest banks. The settlement deal, struck in January, came after regulators accused 13 lenders, including JPMorgan Chase and Bank of America, of wrongful evictions, bungled loan modifications and other abuses.
The problem stems from last week, when Rust issued checks to customers of Morgan Stanley and Goldman Sachs. Unlike the other banks involved in the settlement, Goldman Sachs and Morgan Stanley’s foreclosures were not part of a long independent assessment by outside auditors. As such, the banks agreed to pay some of its customers an extra sum.
But Rust, according to the officials briefed on the matter, failed to follow the banks’ payout plan. Instead, it issued checks to customers of Goldman Sachs and Morgan Stanley based on a metric adopted by the 11 other banks.
The misstep deprived the homeowners of thousands of dollars. For example, some customers in bankruptcy who were evicted wrongfully deserved $4,650. They received $3,750 instead.