Ten of the nation’s largest banks reached a settlement with federal regulators on Monday that cuts short a foreclosure review process in exchange for paying out $3.3 billion in cash and offering $5.2 billion worth of program credits such as loan modification, to affected homeowners. More than four million homeowners who were foreclosed upon between 2009-2010 were invited to submit paperwork for a free review of their foreclosure processes but only about half a million did so. Still, that number was apparently too great, and the process too complicated for bank-employed reviewers.
At stake are charges by homeowners contending that widespread errors and rampant negligence by banks in handling home loans led to improper foreclosures and the loss of people’s homes.
Banks spent a total of $1.5 billion to begin reviewing these foreclosures, and even though the reviewers hired were meant to be independent, the investigative media outlet ProPublica found that consultants who depended upon the banks for other business were the ones hired to do the reviews, making their actual independence questionable. In fact, the total number of homeowners determined by reviewers to have been harmed by banks during foreclosures processes was minuscule, prompting harsh criticism from consumer advocates.
While the details of the settlement are still vague, officials from the Office of the Comptroller of the Currency (OCC) explained that homeowners would be classified into about a dozen categories depending upon how much harm they were determined to have suffered. Based on their classification, consumers could receive anywhere between $125,000 to a few hundred dollars, and those who requested reviews would get more than those who did not.
The ten banks involved in the settlement included Bank of America, Wells Fargo, J P Morgan Chase, and Citigroup.This settlement is separate from a $25 billion settlement between five banks and State Attorneys General last year, also around the issue of foreclosures.
GUEST: Paul Kiel, reporter with ProPublica, author of the e-book, The Great American Foreclosure Crisis. Kiel won the Society of American Business Editors and Writers Best in Business Award for Investigative Reporting, as well as the Scripps Howard Award in Business/Economics Reporting for his work on the foreclosure crisis.
Click here to read Paul Kiel’s work.