Ten leading banks including Bank of America Corp (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM), and Wells Fargo & Company (NYSE:WFC) among others agreed to pay $8.5 billion to resolve the complaints filed by the federal government in connection with the wrongful foreclosures of homes.
According to regulators, out of the $8.5 billion settlement, $3.5 billion will be used to pay borrowers directly, and $5.2 billion will be used for loan modifications and other assistance.
The report cited that Bank of America Corp (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM), and Wells Fargo & Company (NYSE:WFC) agreed to pay billions of dollars to conclude the review process of the paperwork of homeowners included in the foreclosure files under the 2011 enforcement action. The review process was initiated because the banks did not follow the required steps in the foreclosure process. As a result, many homeowners were not allowed to stay in their homes.
Homeowners whose homes were wrongfully foreclosed could receive $1,000 to $125,000 under the new settlement, this was announced by the Office of the Comptroller of the Currency (OCC) and the Federal Reserve. Based on the previous guidelines released by the OCC, a person is entitled to receive the biggest payment if his house was seized and sold unfairly.
The settlement will cover around 3.8 million homeowners under foreclosures from 2009 to 2010. According to advocates, approximately 400,000 homeowners could receive payments.
In a statement, Thomas Curry, comptroller of the currency said, “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. 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.”
On the other hand, Diane Thompson, legal counsel at the National Consumer Law Center described the settlement as “another get out of jail free card for the banks.” She said, “It caps their liability at a total number that’s less than they thought they were going to pay going in.”
Meanwhile, the leaderships of the House oversight committee required regulators to provide a briefing regarding the proposed settlement.