Federal complaints have been settled by 10 major banks and mortgage companies on Monday worth $8.5 billion. The complaints said that the companies wrongfully foreclosed on homeowners who should have been permitted to remain in their homes, according to The Associated Press.
The banks include Bank of America, JPMorgan Chase and Wells Fargo and they will pay billions of dollars to homeowners to complete the review process of foreclosure files required under the 2011 enforcement action, which was ordered because banks incorrectly handled paperwork for homeowners and skipped required steps in the process of foreclosure.
Homeowners who were wrongfully foreclosed could receive anywhere from $1,000 to $125,000 from the settlement. The lighter offense in the process would be failing to offer a homeowner a loan modification. The largest payouts would come from an offense such as unfairly seizing and then selling someone’s home. These come from guidelines issued by the Office of the Comptroller of the Currency.
The settlement will cover close to 3.8 million people who were in the process of foreclosure in 2009 and 2010. Of those 3.8 million people, some 400,000 could be entitled to payments. Regulators noted that $3.3 billion would be direct payments made to borrowers. Some $5.2 billion would pay for assistance such as loan modifications.
Other companies in the settlement include the following: Citigroup, MetLife Bank, PNC Financial Services, Sovereign, SunTrust, U.S. Bank and Aurora. The action from 2011 also includes the following companies: GMAC Mortgage, HSBC Finance Corp. and EMC Mortgage Corp.
In a statement, the Comptroller of the Currency, Thomas Curry, said that the deal “represents a significant change in direction” from the original, 2011 agreements.
Curry noted that the deal reached meets original objectives set forth “by ensuring that consumers are the ones who will benefit, and that they will benefit more quickly and in a more direct manner. It has become clear that carrying the process through to its conclusion would divert money away from the impacted homeowners and also needlessly delay the dispensation of compensation to affected borrowers,” Curry said.
Consumer advocates are claiming that the settlement lets banks off the hook for payments that could have wound up being much more.
“It’s another get out of jail free card for the banks,” said Diane Thompson, a lawyer with the National Consumer Law Center. “It caps their liability at a total number that’s less than they thought they were going to pay going in.”
A briefing regarding the proposed settlement was issued on Friday to members of a House oversight panel from regulators.