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Ten Banks Agree to $8.5 Billion Settlement
Ten U.S. banks have agreed to pay $8.5 billion to settle charges that they wrongfully foreclosed on millions of homeowners in the aftermath of the housing bust, the Federal Reserve reported on Monday.
Banks involved in the settlement are Aurora, Bank of America, Citibank, JPMorgan Chase, MetLife Bank, PNC, Sovereign, SunTrust, U.S. Bank, and Wells Fargo.
Four other banks - HSBC, Ally, EverBank and One West - are still in negotiations.
The sum includes $3.3 billion in direct payments to eligible borrowers - with compensation ranging from several hundred dollars up to $125,000, depending on the type of error made by the mortgage company. The remaining $5.2 billion will go towards other assistance such as loan modifications and forgiveness of deficiency judgements.
The settlement puts an end to the case-by-case review of loans that consumer advocates and banks said slowed the process as well as diverted large amounts of money for paying consultants that could have been used to benefit homeowners.
Comptroller of the Currency Thomas J. Curry said in a statement, “When we began the Independent Foreclosure Review, the OCC pledged to fix what was broken, identify who was harmed, and compensate them for that injury. While today’s announcement represents a significant change in direction, it meets those original objectives by ensuring that consumers are the ones who will benefit, and that they will benefit more quickly and in a more direct manner.”
But while OCC officials maintain that this settlement will get money back to the affected borrowers more quickly and help speed the nation’s housing recovery, critics say that the deal shorted borrowers and let banks off with a much smaller than they could have been liable for.
Attorney Diane Thompson of the National Consumer Law Center said in an interview that the “reasonable estimates” of extent of the damage done to homeowners covered under the settlement would be “in of the tens of billions of dollars - significantly more than will be paid.”
Nonetheless, Thompson agrees the loan-by-loan review process wasn’t working. “Anything that speeds up the process and provides a fairer result than we were getting with the reviews is a good thing,” she said. “But we're going to need a lot of oversight and a lot of transparency if we're going to have any public confidence in the results of this process.”
The more than 3.8 million borrowers who are due compensation under the settlement will be contacted about payment details by the end of March.
In a separate housing crisis-linked settlement today, Bank of America also agreed to pay mortgage giant Fannie Mae more than $10 billion to settle claims that it sold Fannie risky mortgages.
Bank of America Chief Executive Officer Brian Moynihan said in a statement, “As we enter 2013, we sharpen our focus on serving our three customer groups and helping to move the economy forward. Together, these agreements are a significant step in resolving our remaining legacy mortgage issues, further streamlining and simplifying the company and reducing expenses over time.”
Sources:
Federal Reserve Board
PBS Newshour
Bank of America
Banks involved in the settlement are Aurora, Bank of America, Citibank, JPMorgan Chase, MetLife Bank, PNC, Sovereign, SunTrust, U.S. Bank, and Wells Fargo.
Four other banks - HSBC, Ally, EverBank and One West - are still in negotiations.
The sum includes $3.3 billion in direct payments to eligible borrowers - with compensation ranging from several hundred dollars up to $125,000, depending on the type of error made by the mortgage company. The remaining $5.2 billion will go towards other assistance such as loan modifications and forgiveness of deficiency judgements.
The settlement puts an end to the case-by-case review of loans that consumer advocates and banks said slowed the process as well as diverted large amounts of money for paying consultants that could have been used to benefit homeowners.
Comptroller of the Currency Thomas J. Curry said in a statement, “When we began the Independent Foreclosure Review, the OCC pledged to fix what was broken, identify who was harmed, and compensate them for that injury. While today’s announcement represents a significant change in direction, it meets those original objectives by ensuring that consumers are the ones who will benefit, and that they will benefit more quickly and in a more direct manner.”
But while OCC officials maintain that this settlement will get money back to the affected borrowers more quickly and help speed the nation’s housing recovery, critics say that the deal shorted borrowers and let banks off with a much smaller than they could have been liable for.
Attorney Diane Thompson of the National Consumer Law Center said in an interview that the “reasonable estimates” of extent of the damage done to homeowners covered under the settlement would be “in of the tens of billions of dollars - significantly more than will be paid.”
Nonetheless, Thompson agrees the loan-by-loan review process wasn’t working. “Anything that speeds up the process and provides a fairer result than we were getting with the reviews is a good thing,” she said. “But we're going to need a lot of oversight and a lot of transparency if we're going to have any public confidence in the results of this process.”
The more than 3.8 million borrowers who are due compensation under the settlement will be contacted about payment details by the end of March.
In a separate housing crisis-linked settlement today, Bank of America also agreed to pay mortgage giant Fannie Mae more than $10 billion to settle claims that it sold Fannie risky mortgages.
Bank of America Chief Executive Officer Brian Moynihan said in a statement, “As we enter 2013, we sharpen our focus on serving our three customer groups and helping to move the economy forward. Together, these agreements are a significant step in resolving our remaining legacy mortgage issues, further streamlining and simplifying the company and reducing expenses over time.”
Sources:
Federal Reserve Board
PBS Newshour
Bank of America
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