New London - After going through "19 months of hell," Christine Denoia had hoped for a large payment from a $9.3 billion federal compensation fund that penalized some of the nation's largest financial institutions for abusive tactics such as wrongful evictions.

Instead, when the 51-year-old city resident received her check in the mail from the Independent Foreclosure Review last week, she found her share of the money was $500 - not even enough to retain an attorney to pursue a lawsuit against her lender, Bank of America.

"Every month, I had the anxiety of 'Am I going to be thrown out of my home?'" Denoia said. "This is a joke."

Denoia was one of more than 4 million people scheduled to receive a share of $3.6 billion in initial cash payments set up after federal banking regulators and more than a dozen mortgage servicers, including Chase, Citibank, Morgan Stanley, Wachovia and Washington Mutual, came to an agreement over abusive foreclosure tactics.

Bank of America, one of the banks included in the agreement, noted in an email to The Day that payments were set by U.S. regulators, not the financial institutions.

"Borrowers who received proper consideration for foreclosure alternatives, were not foreclosed upon and experienced little or no financial harm receive minimum payments under the government's framework," spokesman Richard G. Simon said.

Payments for abuses that occurred in 2009 and 2010 were to range from $300 to a maximum of $125,000, according to the agreement finalized in January. The larger amounts would go to those forced from their homes despite being current on mortgage payments, as well as to an estimated 1,100 active duty military personnel who were evicted despite a federal law prohibiting this practice.

Some of the first checks to go out this month bounced, according to a report at Forbes.com. The Federal Reserve acknowledged consumers had problems cashing their checks at first but assured that the problems had been corrected.

"Funds are available to cash all checks," the Fed said in a statement issued shortly after the bounced-check problems occurred.

Criticism of the foreclosure review surfaced during a Congressional hearing earlier this month at which Democratic politicians questioned the cozy relationships between regulators and banks.

"People want to know that their regulators are watching out for the American public - not for the banks," U.S. Sen. Elizabeth Warren, D-Mass., said during the hearing.

In addition to $3.6 billion in direct cash compensation, the fund contains another $5.7 billion intended to help prevent future foreclosures by increasing the number of mortgage modifications and even forgiving portions of loans.

The Independent Foreclosure Review proceedings are not to be confused with a separate $25 billion Mortgage Foreclosure Servicing Settlement that state Attorney General George Jepsen announced in February 2011. The settlement with five large loan servicing companies will help compensate up to 7,500 Connecticut borrowers who lost their homes to foreclosure from 2008 to 2011, and the first checks are expected to go out next month.

Jepsen spokeswoman Susan Kinsman said state residents are expected to receive an average of about $1,500 from the servicing settlement - three times what New London resident Denoia got from the foreclosure review process. Denoia said she never knew about or applied for funds from the servicing settlement.

Denoia, who has been on disability for the past six years and also gets child support, acknowledged that she received principal reduction approval from Bank of America in August that knocked nearly $20,000 off her mortgage. This came after she had filed a complaint with the Consumer Financial Protection Bureau.

Denoia complained to regulators about what she felt were Bank of America's unfair tactics from the start, claiming that she was told her loan would carry an interest rate of about 6.5 percent only to learn later that it had been set at slightly more than 7 percent. What's more, taxes were not included in her mortgage payment, though she thought they would be. This meant she had to come up with another $350 every month for her housing expenses.

"I did as best as I could for a while," she said, while trying to cover the monthly housing costs of $1,650, "then I asked for help."

A series of setbacks

Having not received the requested loan modification, in October 2008 Denoia stopped paying on her $181,000 mortgage and sent complaints first to the state Department of Banking, then to U.S. Sen. Christopher Dodd, D-Conn., and Attorney General Richard Blumenthal. Finally, she had her case transferred to the federal Office of Comptroller of the Currency.

The OCC sent Denoia a letter backing Bank of America. She said she had provided documentation that showed some of the bank's inconsistencies and inaccuracies, including confusing Denoia's Freeman Street home with the address of a house she had earlier hoped to purchase in Waterford. All of the errors, she said, could be proved through court documents.

In June 2009, Bank of America filed for foreclosure. But a few months later, the bank offered her what she called a trial modification that lowered her payments to $814 a month - about $400 less than her initial mortgage with only 2 percent interest - if she made three consecutive monthly payments on time.

She made the payments, she said, and then was told by a Bank of America representative not to send any further checks until paperwork for the permanent modification arrived. The paperwork never came, and the bank later claimed that it didn't offer the permanent modification because it stopped receiving payments, according to documents provided by Denoia.

Bank spokesman Simon last week said that what Denoia considered a trial modification was really a "short-term forbearance plan" that offered temporary relief from high payments. This, however, is contradicted by a letter that Bank of America sent to Denoia in April 2010 that referred to the "three month trial modification" that began in September 2009.

Simon went on to point out that the financial institution worked through a mediator for a long period of time and three years later offered a trial modification that became permanent last February. Denoia said she has been current with her mortgage ever since.

"Her modified loan included the lowest interest rate (2 percent for the first five years, capped at 3.875 percent, the market rate at the time of the modification), the longest term (40 years), and interest-free forbearance of a substantial amount of principal, resulting in the lowest monthly payment possible under the modification guidelines for her loan," Simon said.

Denoia, who acknowledged the bank's agreement to waive nearly $20,000 in charges she racked up while withholding payments on her loan, has a different take on the permanent modification. She points out that the second modification came with payments nearly $200 above what she previously had been paying.

"'You had a chance to do the right thing after I made the first three payments,'" Denoia said she told the bank's representatives. "I was so furious."

Friends thought she was wasting her time, but in 2010, Denoia wrote to President Barack Obama. A couple of weeks later, she received a letter from the Council of Inspectors General on Financial Oversight at the U. S. Department of the Treasury saying that she could join in the foreclosure-review process.

"I'm thinking this is my magic bullet," she said.

Instead, she ended up receiving $500, with no information about how the review process reached that number and no way to appeal.

"I was just devastated," she said. "I cried all night. ... For me, it was more of an insult than anything else."

Denoia nevertheless cashed her check while making her feelings known to Bank of America officers at the Waterford branch. She said they asked her what it would take to satisfy her.

"My home," she replied, meaning the bank should turn over the deed to her.

Asked for a second choice, Denoia said she didn't back down. "My home and punitive damages," she said.

As with every step of the process, Denoia left the bank without a final resolution.

Bank of America, however, said the Denoia case illustrates its commitment to avoiding foreclosure.

"She ... now has a fresh start with the most affordable payment available through the modification process," spokesman Simon said.

l.howard@theday.com