These banks must have a lot of money laying around….
A $10 billion settlement to resolve claims of foreclosure abuses by 14 major lenders is expected to be announced as early as Monday, several people with knowledge of the discussions said on Sunday.
The settlement comes after weeks of negotiations between federal regulators and the banks, and covers abuses like flawed paperwork and botched loan modifications, said these people, who spoke on condition of anonymity because the deal had not been made public.
An estimated $3.75 billion of the $10 billion is to be distributed in cash relief to Americans who went through foreclosure in 2009 and 2010, these people said. An additional $6 billion is to be directed toward homeowners in danger of losing their homes after falling behind on their monthly payments.
All 14 banks , including JPMorgan Chase, Bank of America and Citigroup, are expected to sign on.
The agreement comes almost a year after a sweeping deal in February between state attorneys general and five large mortgage lenders.
The settlement almost fell apart over the weekend. Some officials at the Federal Reserve threatened to scuttle the deal unless the banks agreed to pay an additional $300 million for their role in the 2008 financial crisis, which upended the housing market and led to millions of foreclosures.
The Fed officials argued for additional aid for homeowners ensnared in a flawed foreclosure process, according to several people briefed on the negotiations who spoke on condition of anonymity. The $300 million demand was to come on top of the $10 billion payout, but was met with resistance from the banks, especially because it was raised late in the day on Friday, according to these people.
The Federal Reserve officials backed down, allowing the $10 billion pact to move forward ahead of bank earnings releases this month, these people said.
During the last week, officials from the Federal Reserve met with community groups and consumer advocates to gather comments about a settlement. It was those talks that induced the Fed to forgo the request for additional money, according to three people familiar with the matter. The thinking, these people said, was that broad relief was better than a lengthy review process that had not yielded much relief.
It is still unclear how the monetary relief will be distributed among homeowners, but one immediate result of the settlement is the end of a troubled review of millions of loan files.
As part of a consent order in April 2011, the comptroller’s office and the Federal Reserve established the Independent Foreclosure Review, which mandated that banks hire independent consultants to audit loan files and look for illegal fees, bungled loan modifications and instances where borrowers lost their homes even though they were current on their payments. Only 323,000 homeowners submitted claims for their files to be reviewed.
Within the comptroller’s office, senior officials raised concerns that the reviews had grown bloated and inefficient, especially after each loan took more than 20 hours to review, up from original estimates of eight hours a file.
The mounting costs of the reviews, up to $250 an hour, began to worry the banking regulators, according to several of the people with knowledge of the matter. So far, the foreclosure review program has cost the banks an estimated $1.5 billion, according to these people.
Banking regulators grew concerned that the reviews were not producing meaningful instances of banks wrongfully seizing the homes of borrowers who were current on their payments, according to these people.
And within this settlement, Jim, is there anything about the “Tan Man” (Angelo Mozillo from Countrywide) going to jail? Nah, didn’t think so…
Who? They forgot all about him.
It appears that the government is only concerned with looking good.
This foreclosure-review nonsense was doomed from the beginning, because those who were foreclosed have moved on – they were already so discouraged from fighting and losing that they weren’t going to come back for another round.
But because the government had started the process, they couldn’t just drop it and have it look like another failure.
Instead, just get the banks to pony up another $10 BILLION so it looks like the gov did something to punish them….again.
Don’t these fines trickle down to the consumer as higher rates and fees????
In the end, we pay more banks fees so the government can look good. Marvelous.
This was $10B last night, now $8.5B today:
Ten of the largest U.S. mortgage servicers will pay a combined $8.5 billion under an agreement that will end case-by-case reviews of foreclosure-abuse claims stemming from a 2011 deal with regulators.
Companies including JPMorgan Chase & Co., (JPM) Bank of America Corp. and Citigroup Inc. (C) must provide $5.2 billion in mortgage assistance and $3.3 billion in direct payments to wronged borrowers, according to a settlement announced today by the Office of the Comptroller of the Currency and the Federal Reserve. They were among 14 servicers ordered to hire independent consultants to help clean up foreclosure practices amid claims that they improperly seized homes in the wake of the subprime mortgage crisis.
“When we began the Independent Foreclosure Review, the OCC pledged to fix what was broken, identify who was harmed, and compensate them for that injury,” Comptroller of the Currency Thomas Curry said in a statement. “While today’s announcement represents a significant change in direction, 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.”
This agreement announced today covers Bank of America, Citibank, JPMorgan Chase as well as Aurora Bank FSB, MetLife Inc. (MET), PNC Financial Services Group Inc. (PNC), Sovereign Bank, SunTrust Banks Inc. (STI), US Bancorp (USB) and Wells Fargo & Co. (WFC)
About 495,000 borrowers applied by the Dec. 31 deadline to have their foreclosure histories examined for missteps in response to letters sent by regulators to 4.4 million potential claimants. Another 159,000 foreclosures were chosen in a sampling process, according to the OCC.
The agency said in June that servicers would be required to deliver lump-sum payments to borrowers who had been wronged — as much as $125,000 plus lost equity in the most egregious cases. No borrowers have received compensation in the nearly two years since the accord has been in place.
Separately, federal authorities and state attorneys general continue to press regional banks to accept a settlement over mishandled foreclosure documents similar to a $25 billion deal reached with larger competitors last year, according to people briefed on the talks.