Quantcast
  

Wednesday, April 23, 2014         

 Print   Email   Comment | View 0 Comments   Most Popular   Save   Post   Retweet

Millions of homeowners due cash from banks in settlement

By McClatchy News Services

POSTED:



WASHINGTON » Almost 4 million homeowners might receive cash compensation and mortgage relief in a multibillion-dollar settlement with 10 major banks, government regulators announced Monday.

Bank of America, JPMorgan Chase, Wells Fargo and seven other mortgage-servicing companies have agreed to give borrowers $3.3 billion in direct payments and $5.2 billion in the form of loan modifications and other assistance to settle allegations that they wrongly foreclosed on homeowners in 2009 and 2010. The other lenders are Citibank, MetLife Bank, PNC, Sovereign, SunTrust, U.S. Bank and Aurora.

Eligible homeowners may receive payments that range from hundreds of dollars to $125,000, depending on the type of error.

The settlement amounts to a "mea culpa" by mortgage servicers, which are effectively bill collectors for investors who collectively own mortgages that have been pooled together, often by Wall Street firms, into complex bonds called mortgage-backed securities.

Many servicers were first set up by Wall Street banks, such as Bear Stearns and Lehman Bros., that disappeared or collapsed during the U.S. financial crisis in 2008. Wall Street banks infamously looked past poor underwriting, particularly in boom states such as Florida and California, because the buck was passed to unsuspecting investors, who thought they were buying AAA-rated mortgage bonds, prompting the slogan, "A rolling loan gathers no loss."

But as more and more borrowers failed to meet their mortgage commitments or saw their home values plunge, a housing crisis gained steam in 2008 and 2009. Servicers were overwhelmed with requests for loan modifications, and the problem of homes that now are worth less than the mortgages they carry continues to bedevil the housing market.

The agreement announced Monday ends an "independent foreclosure review" of 4 million loan files mandated in a 2011 enforcement action by the Office of the Comptroller of the Currency and the Federal Reserve. The costly and time-consuming process required banks to hire independent consultants to review the files on a case-by-case basis to identify mistakes such as lost paperwork, miscalculated payments, illegal fees and other slipshod mortgage servicing and foreclosure practices.

The Government Accountability Office reported in July that the review was too complex and that borrowers "might not be motivated to participate."

Regulators said the settlement announcement Monday would provide more speedy relief to borrowers, who now will receive compensation regardless of whether they've filed requests for review.

Bank officials said they were pleased to have the independent foreclosure review behind them.

"We have helped nearly 1 million homeowners avoid foreclosure over the last four years and will continue to help others who may be struggling to make their payments," JPMorgan Chase spokes­woman Amy Bonitatibus said.

Consumer advocates welcomed the decision to replace the failed review process with a settlement that will return at least some cash to victims of unfair banking practices. But they said many problems remained.

"The money is grossly inadequate for homeowners, and the program will require careful oversight to ensure that all homeowners harmed get a fair chance at benefits," said Ed Mierz­win­ski, consumer program director for U.S. PIRG, a nonprofit advocacy group.

"Finally, of course, we need strong federal mortgage-servicing standards to protect all homeowners from the unfair and incompetent servicing and foreclosure practices that have driven many out of their minds due to lost, wrong or even illegally prepared paperwork and forced far too many more out of their homes," Mierz­win­ski said.

———

Lindsay Wise and Kevin G. Hall, McClatchy Newspapers






 Print   Email   Comment | View 0 Comments   Most Popular   Save   Post   Retweet

COMMENTS
(0)
You must be subscribed to participate in discussions
By participating in online discussions you acknowledge that you have agreed to the TERMS OF SERVICE. An insightful discussion of ideas and viewpoints is encouraged, but comments must be civil and in good taste, with no personal attacks. Because only subscribers are allowed to comment, we have your personal information and are able to contact you. If your comments are inappropriate, you may receive a warning, and if you persist with such comments you may be banned from posting. To report comments that you believe do not follow our guidelines, email commentfeedback@staradvertiser.com.
Leave a comment

Please login to leave a comment.
IN OTHER NEWS
Latest News/Updates