BANKING

U.S. banks to pay $8.5B to settle foreclosure missteps

BLOOMBERG FILE PHOTO/JEFF KOWALSKY
IN ORDER TO SETTLE foreclosure missteps, 10 of the largest U.S. banks, including Bank of America Corp., will pay a combined $8.5 billion.
Posted 1/7/13

WASHINGTON - 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., Bank of America Corp. and Citigroup Inc. 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., PNC Financial Services Group Inc., Sovereign Bank, SunTrust Banks Inc., US Bancorp and Wells Fargo & Co.

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.

Lump-sum payments

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.

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