Posted by GLOZAL on January 9, 2013 at 2:31pm
Ten major banks have agreed to pay more than $8.5 billion in a settlement with federal regulators over lenders’ past mistakes in processing foreclosures.
About $3.3 billion of the settlement is to help 3.8 million eligible home owners who were foreclosed upon in 2009 and 2010. About $5.2 billion of the settlement will then be provided in assistance to home owners struggling financially, such as through mortgage modifications. Eligible borrowers who were foreclosed upon in 2009 and 2010 and were subject to various abuses could receive up to $125,000, but the average amount per borrower is less than $900. They will be contacted by a payment agent by the end of March.
The deal is essentially a do-over of an April 2011 federal enforcement effort to correct mortgage and foreclosure abuses and compensate borrowers. That effort has been maligned by critics.
That agreement ordered 14 major mortgage servicers to hire consultants to review past foreclosures and compensate borrowers for abuses. Those abuses include the banks’ use of faulty paperwork, foreclosing on mortgages they didn’t own, failing to provide proper notice of default and foreclosing while a borrower had the protection of bankruptcy or was under a loan modification plan.
Originally, the banks had agreed to conduct an Independent Foreclosure Review program, which allowed eligible home owners who were foreclosed upon to have their cases reviewed for possible compensation. But the program has only attracted a small portion of eligible home owners who’ve taken advantage of the free reviews. The latest settlement would end those case-by-case reviews of foreclosures by the 10 banks.
The Fed said individual borrowers could receive compensation whether or not they requested a review of their case. Borrowers also will not lose their rights to sue banks for alleged wrongdoing.
Thomas Curry, the Comptroller of the Currency, said his office set out with the foreclosure reviews “to fix what was broken, identify who was harmed, and compensate them for that injury.”
U.S. Rep. Elijah Cummings, D-Md., the ranking member of the House Committee on Oversight and Government Reform, expressed disappointment that regulators announced the agreement without first briefing his committee.
Cummings said “this settlement may allow banks to skirt what they owe and sweep past abuses under the rug without determining the full harm borrowers have suffered.”
The settlement is separate from a $25 billion mortgage settlement last year between five of the nation’s largest banks and attorneys general from 49 states.
The 10 mortgage companies involved in the latest settlement include:
Bank of America
Source: “Major Banks Reach $8.5 Billion Mortgage Settlement,” Atlantic Journal Constitution
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