New York State will be paid $25 million by five major banks in the United States because they used electronic mortgage databases that the state claims caused deceptive and illegal practices that caused over 13,000 foreclosures. The five banks are Bank of America Corp, JPMorgan Chase & Co, Wells Fargo & Co, Ally Financial and Citigroup Inc. Ally Financial and Citigroup Inc agreed to pay $5.9 million and $1.25 million respectively. The other three banks agreed to pay $5.9 million each. The payments are settlement for a lawsuit that claims the banks used the Mortgage Electronic Registration System (MERS). Ally Financial and Citigroup Inc were not named in the lawsuit.
All five of the banks reached a settlement with 49 states and federal agencies in February that pays $25 billion. The settlement helps solve government lawsuits regarding faulty foreclosures and requests for loan modification. The banks involved in the settlement from February never admitted nor denied their use of MERS, which was created back in the 1990s in an effort to track ownership of mortgages. The system has plenty of inaccuracies according to New York State Attorney General Eric Schneiderman.
The state is going to drop some of the claims of MERS use since the banks have agreed to pay the $25 million. Mortgage defaults and foreclosures will be addressed by the state with the money it is being paid by the banks in the settlement.
In the lawsuit in New York, some other allegations have yet to be solved, and those claims will still be pursued by borrowers and homeowners.
“We intend to aggressively litigate this case to finally prohibit the widespread illegal and deceptive practices of the banks set forth in our complaint,” Danny Kanner, one of Schneiderman’s spokespeople said. “The significant sum of $25 million obtained by this office does absolutely nothing to limit the aggressive posture we will continue to take to protect homeowners and borrowers.”
The lawsuit claims that improper New York foreclosures were filed because the banks used the MERS system. The system has over 70 million mortgage loans and subprime loans instead of those loans being filed in county clerk’s offices.
The settlement deal will be spread over three years and it requires that the banks involved cut their mortgage debt amounts and offer $2,000 payments to borrowers who suffer home loss as a result of foreclosure. The five banks are still facing multiple government enforcement actions and lawsuits filed by investors because they packaged home loans into securities.