10 banks agree to pay $8.5B for foreclosure abuse

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WASHINGTON Ten major banks agreed Monday to pay $8.5 billion to settle federal complaints that they wrongfully foreclosed on homeowners who should have been allowed to stay in their homes.

The banks, which include JPMorgan Chase (JPM), Bank of America (BAC) and Wells Fargo (WFC), will pay billions to homeowners to end a review process of foreclosure files that was required under a 2011 enforcement action. The review was ordered because banks mishandled people's paperwork and skipped required steps in the foreclosure process.

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Big banks settle mortgage claims

The settlement was announced jointly by the Office of the Comptroller of the Currency and the Federal Reserve.

Separately, Bank of America agreed Monday to pay $11.6 billion to government-backed mortgage financier Fannie Mae to settle claims related to mortgages that soured during the housing crash.

The agreements are the banks' latest step toward eliminating hundreds of billions of dollars in potential liabilities related to the housing crisis that crested in 2008. When they release fourth-quarter earnings later this month, the banks hope to reassure investors that they are making progress toward addressing those so-called legacy claims.

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But advocates say the foreclosure deal allows banks to escape responsibility for damages that might have cost them much more. Regulators are settling at too low a price and possibly at the expense of the consumer, they say.

"This was supposed to be about compensating homeowners for the harm they suffered," said Diane Thompson, a lawyer with the National Consumer Law Center. The payout guidelines already allowed wronged homeowners less compensation than the actual damages to them, she said.

Under the settlement, people who were wrongfully foreclosed on could receive from $1,000 up to $125,000. Failing to offer someone a loan modification would be considered a lighter offense; unfairly seizing and selling a person's home would entitle that person to the biggest payment, according to guidelines released last summer by the OCC.

The agreement covers up to 3.8 million people who were in foreclosure in 2009 and 2010. All will receive some amount of compensation. That's an average of $2,237 per homeowner, although the payouts are expected to vary widely.

About $3.3 billion would be direct payments to borrowers, regulators said. Another $5.2 billion would pay for other assistance including loan modifications.

The companies involved in the settlement also include Citigroup (C), MetLife Bank (MET), PNC Financial Services (PNC), Sovereign, SunTrust (STI), U.S. Bank (USB) and Aurora. The 2011 action also included GMAC Mortgage, HSBC (HBC) and EMC (EMC).

The deal "represents a significant change in direction" from the original, 2011 agreements, Comptroller of the Currency Thomas Curry said in a statement.

Banks and consumer advocates had complained that the loan-by-loan reviews required under the 2011 order were time consuming and costly without reaching many homeowners. Banks were paying large sums to consultants who were reviewing the files. Some questioned the independence of those consultants, who often ruled against homeowners.

Curry said the new deal meets the 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."

"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.

Thompson agreed that the earlier review process was deeply flawed and said the move toward direct payments is a positive development. But she said the deal will only work if it includes strong oversight and transparency provisions.

"It's another get out of jail free card for the banks," said Thompson. "It caps their liability at a total number that's less than they thought they were going to pay going in."

Citigroup said in a statement that the bank is "pleased to have the matter resolved" and believes the agreement "will provide benefits for homeowners." Citi expects to record a charge of $305 million in the fourth quarter of 2012 to cover its cash payment under the settlement. The bank expects that existing reserves will cover its $500 million share of the non-cash foreclosure aid.

Bank of America CEO Brian Moynihan said the agreements were "a significant step" in resolving the bank's remaining legacy mortgage issues while streamlining the company and reducing future expenses.

Leaders of a House oversight panel asked regulators for a briefing on the proposed settlement on Friday. Regulators refused to brief Congress before announcing the deal publicly.

Maryland Congressman Elijah Cummings, the top Democrat on the House Committee on Oversight and Government Reform, said in a statement that he was "deeply disappointed" in the regulators' actions.

"I have serious concerns that this settlement may allow banks to skirt what they owe and sweep past abuses under the rug without determining the full harm borrowers have suffered," Cummings said. He said regulators have failed to answer key questions about how the settlement was reached, who will get the money and what will happen to others who were harmed by these banks but were not included in the settlement.

The settlement is separate from a $25 billion settlement between 49 state attorneys general, federal regulators and five banks: Ally, formerly known as GMAC; Bank of America; Citigroup; JPMorgan Chase and Wells Fargo.

[Teylore]

I personally think that bankruptcy is much better than foreclosure. You seem to bounce back from bankruptcy a lot faster now days. They have secured credit cards and all kinds of ways to rebuild you credit. But foreclosure is more like an event that even with recovered credit, could keep you from buying another home. Even if the information is no longer on your credit report after seven years, your lender is still going to ask you is you had any previous foreclosures or not.


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[BOMBTEHRAN]

They should all be "Drawn and Quartered"!

[georgecurry]

so how long will they take to pay out like any other class action it takes 2 + year's to do it i would like to now please .......

[cab_351]

that fee is probably just what they made in intrest on the profit they got from the repos

[ammo17]

nobody goes to jail,you can buy our government as a "john" buys a "prostitute"how many people killed themselves because of these spineless corrupt bankers and politicians.

[overthehill5]

Bankers don't go to jail, you know that!

[josephp5]

This was not an accident or oversight by the banks, not when ten of them do the same thing. This was a coordinated policy by the banks who correctly figured that the worst that would happen for illegally foreclosing on homeowners is that they would get a slap-on-the-wrist fine.

The real blame for this travesty lies with President Obama. He talks a great game about holding Wall Street accountable. But time and time again, from the Countrywide fraud to the Citibank illegal VA fees to the Bank of America robo-signing scandal, Obama has shown that he will never bring a criminal case against a CEO.

Obama is a disgrace. Even George W. Bush had Kenneth Lay (his biggest individual donor and CEO of his biggest corporate donor) marched out in handcuffs when the Enron scandal broke.

[josephp5]

Hey Posting: It is you that is the moron.

Of course Obama is responsible! He is the head of the Executive Branch and the boss of Attorney General Eric Holder and the more-obscure Treasury Comptroller Thomas Curry (whom they trotted out to announce this slap-on-the-wrist fine).

Sure, the Justice Department claims to make its decisions regarding federal prosecutions independently of political pressure from the White House, but if you believe that, I've got some swampland in Florida to sell you!

The direction for federal prosecutions comes from the top. And Obama has shown time and time again that he sides with Wall Street over homeowners. He has dismissed blatant illegal activity by banks (such as the robo-signing scandal) by claiming that the real problem is that no laws were actually broken!

Take the MF Global scandal, for example. The company saw that it was going under, so just before it filed bankruptcy someone transferred $1.6 billion from customer accounts into its own accounts. That's just basic stealing! It's not hard to understand. If you or I was to take $1.6 billion from someone and put it into our own bank account, we would instantly be behind bars. Yet Obama has done nothing to bring the people responsible to justice. And this is not ancient history---it was October 2011, just over a year ago.

It is indeed Obama's fault that travesties like these go unpunished.

[cab_351]

sorry idiot,,the blame all goes on bush for this one,,the market was way on its way to crashing before obama was even elected,,my cousin is a loan officer for a bank,,this was all planned,,cant you see that??the justice dept,congress and senate will not go after the real coordinators of this mess,,they all live in foreign countries in europe,,do some digging and see who really runs j.p.morgan chase bank,,the rothchilds in europe,,and have so since the late 1800s,,watch the history channel,,men who made america,,rockefeller,,carnege,vanderbilt, jp morgan,,they give you clues on this documentary on whats really going on,,the stock market is being maniplulated,,the super rich,,builderberg group,rothchilds,vanderbuilts,morgan,rockefeller controll it,,let it grow for some years then when everyone thinks its great,,boom,they mini crash it and make trillions,,look it up,,we are all being taken for fools buy our own gov being used as a smoke screen,,it is not even one party or another,its all of them,,look at who stays in power,,not just in congress or senate but as cabinet members,special group leaders,there are many high power officials they never mention that just keep moving from one job to another,,some have been in power for many presidencies,,look in treasury dept,war dept,state dept,justice dept,pentagon,the list goes on and on,,find out who is who,,wait for the civil war and see how fast they leave the country!

[taxed01]

Still no big-shots behind bars!!!!!!!!!!!!

[TimeToEvolve]

I want to see some CEOs being frog marched off to jail. If you or I had done even close to what they did they would be throwing the jail keys away. What kind of example is that for our kids? Guilty until proven wealthy.

And I think the fines should have been in the hundreds of billions at least. That would serve people right for investing in criminal bankster enterprises for their retirements funds.

[OldTimeTruth]

Where is The Jail Time folks? My thoughts are the banks will now pass this cost on to their customers. This is flat not right. The Leaders of a House better say enough is enough but they won't. It's their big business buddies.