Ten major mortgage servicing banks agreed Monday to pay $8.5
billion to settle charges that they wrongfully foreclosed on millions of
homeowners in the wake of the 2008 financial crisis, particularly through
"robo-signing" practices, when banks automatically signed off on
foreclosures without properly reviewing documents, according to a statement
released jointly by the Office of the Comptroller of the Currency and the
Federal Reserve.
The banks will pay about $3.3 billion directly to qualified
homeowners to end the government-mandated case-by-case review of foreclosures
under a 2011 enforcement action which was ordered because banks were found to
have mishandled paperwork and skipped required steps in the foreclosure process.
Both banks and consumer advocates had complained that the loan-by-loan reviews
required under the 2011 order were time-consuming and costly and and may have
even worked to the disadvantage of the affected homeowners. Banks were
reportedly paying large sums to consultants to review the files, and often, they ruled against homeowners. Of the
case-by-case review, Comptroller of the Currency Thomas Curry, said, "It
has become clear that carrying the process through to its conclusion would
divert money away from the impacted homeowners and also needlessly delay the dispensation
of compensation to affected borrowers."
The $5.2 billion remainder of the $8.5 billion package will
be used to reduce mortgage bills and forgive outstanding principal on home
sales that generated less than borrowers owed on their mortgages.
The agreement covers up to 3.8 million people who were in
foreclosure in 2009 and 2010. All will receive some amount of cash compensation
ranging from hundreds of dollars to $125,000, depending on what type of lender
error occurred, according to the Office of the Comptroller of the Currency.
Homeowners should find out by late March if they were found eligible for
compensation, including those who did not ask for a review so long as they were
involved in the foreclosure process in 2009 or 2010. The payouts will be based
on whether a borrower falls into one of 11 specified categories, ranging from
whether the person was eligible for protections under the Servicemembers Civil
Relief Act, whether the borrower was not in default, or whether he or she was
denied a loan modification, and so forth.
The ten banks which agreed to the settlement are Bank of
America Corp , Citigroup Inc , JPMorgan Case & Co , Wells Fargo & Co ,
MetLife Bank , PNC Financial Services (PNC), Sovereign, SunTrust (STI), U.S.
Bank (USB) and Aurora.
The $8.5 million settlement with these ten banks is separate
from an earlier $25 billion settlement between 49 state attorneys general,
federal regulators and five banks: Ally, formerly known as GMAC; Bank of
America; Citigroup; JPMorgan Chase and Wells Fargo.
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