Three weeks after checks sent to homeowners as compensation for foreclosure abuses were rejected for insufficient funds, the consulting firm at the center of the mishap erred again: a fresh round of checks was written for the wrong amounts.<\/p>\n
In recent days, according to officials briefed on the matter, Rust Consulting issued nearly 100,000 checks for less than the homeowners were owed. The mistake potentially cheated consumers out of millions of dollars they were owed under a deal reached between the government and the nation\u2019s biggest banks.<\/p>\n
Federal regulators ordered Rust to fix its mistake. And in a statement, Rust said late Wednesday that it had \u201ccorrected the error and plans to mail supplemental checks to affected borrowers as soon as May 17.\u201d It attributed the mistake to a \u201cclerical error.\u201d<\/p>\n
But the developments cast another harsh spotlight on Rust, which had been selected as the distributor of checks for the $3.6 billion settlement deal that regulators struck with the banks. The continued problems with Rust also raised questions about the government\u2019s oversight of the firm and the wisdom of hiring it in the first place.<\/p>\n
What\u2019s more, some homeowners complain the problem is broader than Rust has acknowledged. Jennifer Lawson, whose husband is on active duty with the Navy, said she was stunned when she received a check on April 19 for $600. Under the terms of the settlement deal, Ms. Lawson expected thousands of dollars in compensation for her foreclosure.<\/p>\n
\u201cFirst we are wrongfully tossed out of our home while serving this country and then we get basically no money,\u201d Ms. Lawson said.<\/p>\n
The problems have alarmed Capitol Hill and prompted investigations into the settlement.<\/p>\n
\u201cThis is the worst settlement I have seen in my life,\u201d said Representative Elijah E. Cummings, a Democrat from Maryland, who has opened an investigation into problems with the settlement, including the use of Rust.<\/p>\n
With more than 50 federal contracts to its name, and its own political action committee spreading campaign donations across Washington, Rust has become a favored middleman for class-action lawsuits and government settlements.<\/p>\n
In the foreclosure settlement case, in which regulators accused 13 lenders of wrongful evictions and other abuses, Rust appeared to be the logical choice. In fact, when executives from some banks suggested a different consulting firm for the foreclosure settlement, regulators balked, according to people briefed on the matter. The regulators instead suggested that the banks hire Rust.<\/p>\n