Bank of America and other huge banks are starting to pay out large settlements over mortgage malfeasance. Photo Credit: MoneyBlogNewz/Flickr/CC-BY
There have been many instances over the past few years in which major banks were negligent in how mortgages were lent to consumers. Many of the nation’s largest home loan lenders, including Bank of American and Wells Fargo, have been opening their checkbooks to pay back wronged consumers.
Bank of America shelling out for disgraced lender Countrywide
The Federal Trade Commission, according to CBS Moneywatch, recently announced that Bank of America will begin paying $108 million back to people who were overcharged by its subsidiary Countrywide. B of A acquired Countrywide when the mortgage lender was showing signs of serious problems. Countrywide was found to have overcharged borrowers in default for loan servicing fees and property maintenance. Countrywide subsidiaries would charge homeowners whatever they wanted for services to the home while awaiting foreclosure, often far more than what third parties would charge for things like mowing the lawn and home appraisals. The FTC began investigating prior to B of A’s acquisition of the mortgage lender, and now homeowners who were foreclosed on by Countrywide between January of 2005 and June of 2008 can expect a check in the mail by September.
Wells Fargo fined $85 million
Wells Fargo is also getting hit by mortgage malpractice fallout. The Federal Reserve has charged the bank $85 million in civil penalties for improper mortgage loan practices that went on from January 2004 to June 2008, according to the Los Angeles Times. Wells Fargo mortgage officers and loan servicers were found to have pushed homeowners into subprime mortgage loans that were more costly to the consumer and more profitable for the bank during that time, along with encouraging them to exaggerate income on loan application forms. According to Reuters, though Wells Fargo has not admitted to any wrongdoing, the bank still has to settle with the wronged homeowners. It is estimated that it will cost Wells Fargo $200 million to settle with homeowners who were involved in those deals, to the tune of $1,000 to $20,000 per person. It is also estimated that 3,700 people were pushed into such loans, and that it could be as many as 10,000 people.
More fallout on the way
Major banks involved in the various mortgage industry scandals of the past few years are on the hook for billions of dollars in liabilities. Bank of America, according to Bloomberg, is trying to settle Countrywide’s debts to creditors for mortgage backed securities for $8.5 billion, though the value of those assets is said to be as high as $27 billion. B of A recently posted a loss of $8.8 billion for the second quarter of this year, partly because of the $14.5 billion loss recorded by the bank’s home loan division. Volatility in the housing market led JPMorgan Chase to start phasing out its mortgage holdings entirely, according to the San Francisco Chronicle. However, Chase will still be in the mortgage business; it does more than $1 billion per quarter in mortgage business.
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