Tyler Reid struggled to hold onto his Ladera Ranch, Calif., condominium during the recession.
He was self-employed. When his clients dried up, so did his software business. Reid sold his car, ate one meal a day, and paid his taxes with credit cards. He says he tried to get a loan modification or sell his home in a short sale, but he says his bank turned down every request and foreclosed on the condo in 2010.
Reid is among millions of borrowers receiving checks meant to compensate what federal officials have characterized as lenders' lax, botched or abusive procedures during the height of the foreclosure crisis. Thirteen of the nation's major lenders are making the payouts as a result of a $9.3 billion settlement with government regulators.
Reid received a check for $6,000, an amount that pales in light of what he went through, he said.
"The payments ... don't really help people affected by the foreclosures regain any footing, financially or credit-wise," Reid said. "If others are like me, far more money was spent trying to responsibly get help with modifications, make trial payments, etc. I estimate that I spent somewhere in the neighborhood of $20,000 trying to save the house."
Lenders began disbursing checks to 4.2 million borrowers in April. Many checks were for $300. A Santa Ana, Calif., woman opened the envelope and burst into tears. Consumer advocates called the amounts a joke.
As part of the settlement, the banks agreed to make payments totaling $3.6 billion but admitted no wrongdoing.
The compensation process began after the Office of the Comptroller of the Currency and the Federal Reserve decided to pursue a settlement with the banks over foreclosure abuses. Initially, the banks hired consultants to conduct lengthy case-by-case reviews of foreclosures.
That method ultimately was dropped in favor of a broad payout system affecting everyone in some stage of foreclosure during 2009 and 2010 serviced by one of 13 major lenders.
The settlement involved a detailed matrix of payments spelling out what sums borrowers would receive. For example, someone whose home was foreclosed after a loan modification was denied could get $6,000 if the borrower requested a review through the independent foreclosure review process, or $3,000 if he or she did not request a review.
Someone who lost their home after a loan modification application was left undecided could get $800 if the borrower requested a review, or $400 if no review was sought. If the lender did not reach out to try to offer a loan modification or other loss mitigation, a borrower could receive $500 if the borrower asked for a review, or $300 if not.
"They put people into boxes by circumstances as best they could determine," said Harry Gural, communications director for the House Financial Services Committee. "They made rough approximations. There are going to be all kinds of issues about who should have gotten what."
Gural said that under the broad settlement, people who lost homes may have been insufficiently compensated, while others who received money "may not have deserved, given their circumstances, anything."
Some borrowers didn't receive enough. The Federal Reserve announced earlier this month that about 96,000 people who received checks would get an additional check to correct mistakes in the initial payment. The Fed blamed errors made by Rust Consulting, the company disbursing the checks.
The new payments - making up the difference between the amounts that should have been paid and the lower amount paid by Rust - were sent to borrowers whose loans were serviced by former subsidiaries of Goldman Sachs and Morgan Stanley.
It's just the latest glitch in a series. When lenders sent the first wave of checks, some bounced.
Members of Congress, meanwhile, want to know more about the failed review process.
At a hearing in April, Sen. Elizabeth Warren, D-Mass., blasted regulators for withholding records of borrowers who still may be contemplating lawsuits against their banks.
Under the foreclosure review, she said, "Families get pennies on the dollar for being the victims of illegal activities."
The nonpartisan Government Accountability Office, or GAO, also criticized the way the reviews had been conducted, saying in a report: "Complexity of the reviews, overly broad guidance, and limited monitoring for consistency impeded the ability of the Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System to achieve the goals of the foreclosure review - to identify as many harmed borrowers as possible and ensure similar results for similarly situated borrowers."
The report also addressed a lack of transparency, saying withholding information has undermined public confidence in the process.
A top lawyer at the comptroller's office has said federal regulators had underestimated the complexity of compensating borrowers. The Federal Reserve board defended its work.
Rep. Maxine Waters, D-Los Angeles, among those requesting the GAO review, said hiring consultants who were paid by the banks "did not add to the 'independence' of the Independent Foreclosure Review." She has since introduced legislation setting standards for using consultants.