After spending more than $1.5 billion on consultants tasked with finding errors in their foreclosure processes, both banks and regulators have decided that’s money better spent compensating homeowners impacted by illegal foreclosure practices. The settlement totals $8.5 billion, including $3.3 billion in cash to be distributed among as many as 3.8 million borrowers foreclosed on in 2009 and 2010. Specifically, this settlement addresses illegal foreclosure on military families and on those who never missed a mortgage payment.
As reported by The Wall Street Journal, banks involved in the deal include:
- Bank of America
- JPMorgan Chase
- Wells Fargo
- Aurora Loan Services
- PNC Financial
- SunTrust Bank
- Sovereign Bank unit of Banco Santander S
- U.S. BankCorp
Notable omissions from the deal include Ally Financial, HSBC, OneWest Bank and Everbank.
This settlement is in addition to the deal reached early last year. As I blogged in February 2012:
Big banks involved in illegal lending and foreclosure practices have agreed to pay $25 billion in the form of reduced principle balances and refinancing of home loans for as many as 2 million affected homeowners.after 16 months of investigation by the Department of Justice into the illegal robo-signing activity among offending banks, a practice in which bank employees signed off on foreclosures without fully reviewing all of the relevant documents. Forty-nine states signed on to the settlement, notable holdouts among them, including California, New York, Arizona and Nevada. The only state to opt out of the settlement offer was Oklahoma.
Borrowers to be compensated under the newest deal announced this week should be notified by March 31, with payouts that could range from several hundred dollars per borrower to as much as $125,000.