Ten major banks reached an agreement last month to pay a reported $8.5 billion to settle federal complaints that they wrongfully foreclosed on homeowners who should have been allowed to stay in their homes. The Office of the Comptroller of the Currency and the Federal Reserve jointly announced the settlement.
Under the terms of the settlement, the banks will pay homeowners to end a review process of foreclosure files that was required under a 2011 enforcement action. The review had been ordered because it was discovered that the banks mishandled the paperwork of persons, and also skipped required steps in the foreclosure process. The companies involved in the settlement were: JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, MetLife Bank, PNC Financial Services, Sovereign, SunTrust, U.S. Bank and Aurora. The 2011 enforcement action also included GMAC Mortgage, HSBC Finance Corp. and EMC Mortgage Corp.
Under the settlement, homeowners who were subjected to a wrongful foreclosure could receive amounts ranging from $1,000 up to $125,000. According to guidelines released last summer by the OCC, a lighter offense, for example, would be failing to offer someone a loan modification; while conversely, unfairly seizing and selling someone’s home would entitle that person to the biggest payment.
It’s reported that there are up to 3.8 million folks covered under the settlement agreement who were in foreclosure in 2009 and 2010, and all of them will receive some amount of compensation. While it averages out to only $2,237 per homeowner, the payouts are expected to vary widely. According to regulators, about $3.3 billion would be direct payments to borrowers, whereas another $5.2 billion would pay for other assistance, including loan modifications. It’s difficult to know whether this is a real good settlement for the banks’ victims, considering how the settlement is structured. The true monetary value of the settlement could be much less than the reported $8.5 billion.
In any event, Comptroller of the Currency Thomas Curry says the settlement “represents a significant change in direction” from the original 2011 agreements. Banks and consumer advocates had complained that the loan-by-loan reviews required under the 2011 order were time-consuming and costly. The banks were paying large sums to consultants who were hired to review the files. Some have questioned the independence of those consultants, and that’s because they often ruled against the homeowners.
It’s being reported that some of the consultants, who considered what the banks were doing to be fraudulent, were actually fired. The new settlement, however, does meet the original objectives by ensuring that consumers actually benefit from the settlement. Hopefully, the fact that victims will benefit more quickly and in a more direct manner will prove to be a good thing. Many of the homeowners would probably receive much more actual money if they took their claims to litigation, but that’s another story.
The settlement is separate from a recent $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. While the amounts in that settlement, as well as in the current ten-bank deal, seem huge, one must remember that lots of folks were hurt badly by the banks. Putting things in perspective, in reality considering the tremendous harm they did and their legal exposure, the banks may have come out “smelling like a rose.”
If you have any questions about predatory lending or mortgage servicing fraud, contact Bill Robertson, a lawyer in the firm’s Fraud Section, at 800-898-2034 or by email at Bill.Robertson@beasleyallen.com. Bill is currently handling cases against companies involving predatory lending and/or fraudulent mortgage servicing practices.
Source: Associated Press
Contact us today for a free legal consultation with an experienced attorney.
Fields marked *may be required for submission.
If you would like to subscribe to the Jere Beasley Report digital edition, simply visit our Subscriptions page and provide the necessary information or call us at 800-898-2034.
Attorney Advertising - Prior results do not guarantee a similar outcome.