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    Foreclosure deal problems continue

    NEW YORK — At least these checks cleared.

    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.

    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 US government and the nation’s biggest banks.


    Federal regulators ordered Rust to fix its mistake. And in a statement, Rust said late Wednesday that it had ‘‘corrected the error and plans to mail supplemental checks to affected borrowers as soon as May 17.’’ It attributed the mistake to a ‘‘clerical error.’’

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    The developments cast another harsh spotlight on Rust, which was 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’s oversight of the firm — and the wisdom of hiring it.

    What’s 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, Lawson expected thousands of dollars in compensation for her foreclosure.

    The problems have alarmed Capitol Hill and prompted investigations into the settlement.

    “This is the worst settlement I have seen in my life,’’ said Representative Elijah Cummings, Democrat of Maryland, who has opened an investigation into problems with the settlement, including the use of Rust.


    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.

    But problems emerged soon after the settlement was announced in January. The consulting firm, officials said, was initially slow to alert borrowers to expected payments. Then, the officials say, Rust delayed the checks for weeks as it struggled to gear up for the payments.

    Once Rust issued the first round of checks in April, it failed to move money into the bank account used for the settlement.

    The firm’s latest mistake 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 subjected to 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, issued checks to customers of Goldman Sachs and Morgan Stanley based on a metric adopted by the 11 other banks.


    The misstep deprived some homeowners of thousands of dollars.

    Regulators detected the problem Tuesday when a concerned borrower called the Federal Reserve to complain, according to a person briefed on the matter. The Fed then ordered Rust to devise a solution.