The Federal Reserve and the Office of the Comptroller of the Currency, or OCC, determined in early January that 10 of the nation’s largest mortgage companies must pay big bucks for their role in foreclosure abuse claims. The regulatory agencies acknowledged that over 3.8 million borrowers whose home loans were foreclosed upon at the hand of one of the 10 banks cited would receive compensation. The claims were for foreclosures that took place between 2009 and 2010.
Federal regulators discovered substantial evidence that proved the mortgage providers mismanaged paperwork and acted inappropriately regarding the foreclosure process. After repeated complaints were levied, the Federal Reserve and OCC set up a formal system for borrower who felt their home loans were mishandled. By December 31st, nearly 500,000 borrowers had applied for investigations of their foreclosure histories. All told, regulators sent inquiries to 4.4 million possible claimants.Carla Mann, a contributor to Bloomberg, reported on this story on January 8th. According to Mann, “Companies including JP Morgan Chase, Bank of America, Wells Fargo, and Citigroup, must provide $5.2 billion in mortgage assistance and $3.3 billion in direct payments to wronged borrowers.”
June 2013 has been set as the deadline for when the mortgage servicers would have to pay lump sums as large as $125,000 to mistreated borrowers. In extreme cases the lenders will also be responsible for the repayment of lost equity. Regulators have explained that payment agents will contact eligible borrowers by the end of March to discuss the details of payment and how it will be handled. Currently, the regulators and agents are working to set up compensation levels for each of the categories of mismanagement. According to USAToday’s coverage of this story, the OCC noted that, “Every borrower will receive the same compensation as every other borrower in their category, whether or not they were actually harmed.”
Many have declared this method as unsound, including Alys Cohen, a staff attorney for the National Consumer Law Center, who stated, “Although “any movement toward more compensation for homeowners is a step in the right direction,” this agreement is “flawed.” She explained further that, “The size of the settlement “is wholly inadequate in light of the scale of the harm.”
Maryland state Representative Elijah Cummings had this to say:
“I have serious concerns that 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.”
Thomas Curry of the OCC has responded by saying that, “Our new course of action will get more money to more people more quickly, and it will speed recovery in the nation’s housing markets.”
In light of the settlement announcement here are responses from two of the mortgage companies involved:
JPMorgan’s spokesperson Amy Bonitibus stated, “We are pleased to have it behind us and have helped nearly one million homeowners avoid foreclosure over the last four years and will continue to help others who may be struggling.”
Bank of America’s spokesperson Dan Frahm stated, “We support the new approach because it expands the number of borrowers who will receive payment, speeds the delivery of those payments, and will provide support for homeowners still struggling to make payments.”
The other banks involved in this case are Metlife Bank, Aurora, PNC, Sovereign, SunTrust, and U.S. Bank. According to the OCC, there are still 4 more banks under scrutiny – HSBC, Ally, EverBank and One West.
For more details on this story, here is a link to the entire article: http://www.bloomberg.com/news/2013-01-08/mortgage-servicer-deal-basel-s-four-years-compliance.html