Did You Receive Your Payment from Rust Consulting?
Imagine this… You receive an envelope in your mailbox in which you have been sent a 2013 1099-MISC from Rust Consulting. In the return address window are the words “Independent Foreclosure Review,” and Box 3 has the amount of $1000. Only one thing wrong here… you never received any payment from Rust Consulting.
According to Daniel Smith, Vice President of Hill+Knowles (a company that assists Rust Consulting), as of February 4, 2014, the number of uncashed checks at somewhere is 500,000 (that’s checks, not dollars). This was due, in part, to checks lost in the mail and also to the number of people that have moved or relocated during the mortgage meltdown.
What Is Independent Foreclosure Review?
As you may recall, the Independent Foreclosure Review is part of the settlement associated with the robo-signing debacle of 2010. As part of this review, thirteen mortgage servicers and their affiliates identified customers who were part of a foreclosure action on their primary residence during the period of January 1, 2009 to December 31, 2010.
These 13 mortgage servicers sent solicitation letters to 4.2 million potential victims of robo-signing and other foreclosure-related (and potentially fraudulent) matters. These letters provided homeowners the opportunity to request an independent review of their foreclosure process (Independent Foreclosure Review). If the review found that financial injury occurred as a result of errors, misrepresentations, or other deficiencies in the servicer’s foreclosure process, the customer could receive compensation or another remedy.
The deadline to request the independent review was December 31, 2012. However, those who did not respond to the solicitation letters but who were felt to be victims were also included in the settlement.
How Were Disbursements Determined?
Settlement disbursements by the paying agent, Rust Consulting, began in April of 2013 and continue to this day. Borrower remuneration varies from $300 all the way up to $125,000 depending upon their perceived financial harm by the events surrounding their foreclosure activity. The Independent Foreclosure Review Disbursement Breakdown shows that 2.4 million borrowers will receive $300 and approximately 1300 borrowers will receive $125,000—the bulk of borrowers will receive $500 to $600 dollars.
The Independent Foreclosure Review Disbursement Breakdown also contains lists of categories used to determine the disbursements. The categories vary greatly and include wrongdoing to service members, wrongful foreclosures on borrowers not even in default, foreclosures during a forbearance period, and even successful completion of a loan modifications. The categories are broken down into types of servicer error and some servicer errors are more grievous than others. Many individuals have pointed out that borrowers may fall into multiple categories, yet no additional information has been provided as to the disbursement decision-making process.
So, What’s With the 1099-MISC?
As you may already know, a 1099-MISC is issued when a company pays $600 or more to an independent individual or Limited Liability Company. In this case, Rust Consulting sent a 1099-MISC to any individuals for whom payment was made (or checks were cut in 2013 and undelivered) for over $600.
According to data points from Rust Consulting, “Based on guidance from tax counsel, federal regulators directed Rust Consulting to send Form 1099s to borrowers who received payments as part of the IFR. The company encourages borrowers to seek the advice of qualified tax professionals regarding IFR payments. The forms were mailed whether the associated check was cashed or not. This is in alignment with IRS reporting guidelines, which say that tax obligations – if any – do not require that a recipient has actually cashed a check.”
I contacted Rust Consulting just last week to get a little bit more information. And, when I spoke with an employee, I was told that several hundred thousand wronged borrowers may have a pleasant surprise waiting for them in their mailbox—as many checks issued in 2013 have been reissued the first week in February.
Individuals who received a 1099-MISC and did not receive a disbursement check or individuals who never received their check but received a postcard from Independent Foreclosure Review last March can contact Rust Consulting at 1-888-952-9105 for more information.