Federal regulators have announced a settlement with ten of the nation’s largest bank. Under the agreement, the financial institutions will have to pay out $8.5 billion in lieu of foreclosure abuse reviews.
Foreclosure abuse ‘agreement in principle’
The Federal Reserve and the Office of the Comptroller of the Currency brokered the “agreement in principle,” announced on January 7. The banks — Aurora, Bank of America, Citibank, JPMorgan Chase, MetLife Bank, PNC, Sovereign, SunTrust, U.S. Bank, and Wells Fargo — have agreed to pay $3.3 billion directly to more than 3.8 million borrowers who were subjected to improper foreclosures in 2009 and 2010. In addition, they will pay $5.2 billion for loan modifications, judgment forgiveness and other services.
Ends ‘Independent Foreclosure Review’
The new agreement is to alter the “Independent Foreclosure Review” process, announced in April 2011. That program offered 4.4 million Americans free reviews of their potentially-abusive foreclosure proceedings. However, since that program was begun, only about 500,000 Americans have requested a review. In the wake of the light turnout, federal regulators have decided to end the review process in favor of Monday’s deal.
Americans who requested the reviews will get larger payments than those who did not. According to the Los Angeles Times, those who went through potentially improper mortgage proceedings during the housing crisis but did not request a review can expect “a few hundred dollars.”
“While today’s announcement represents a significant change in direction,” said Comptroller of the Currency Thomas J. Curry, “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.”
Some oppose deal
However, not everyone is pleased with the deal. Democratic Rep. Elijah E. Cummings of Maryland said the deal allows banks to skirt much of their responsibility in the matter.
“I am deeply disappointed that the Office of the Comptroller of the Currency and the Federal Reserve finalized this settlement and effectively terminated the Independent Foreclosure Review process before providing Congress answers to serious questions about how this settlement amount was determined, who these funds will go to, and what will happen to other families who were abused by these mortgage servicing companies, but have not yet had their cases reviewed,” 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.”