By Aruna Viswanatha and Anna Louie Sussman
WASHINGTON, Jan 7 (Reuters) - A group of 10 mortgage
servicers agreed on Monday to pay a total of $8.5 billion to end
a U.S. government-mandated case-by-case review of housing crisis
foreclosures in an acknowledgement the program had proven too
cumbersome and expensive.
Roughly 3.8 million borrowers whose homes were in forclosure
within the time frame of the review will receive cash
compensation ranging from hundreds of dollars up to $125,000,
depending on the type of errors they experienced, the U.S.
Office of the Comptroller of the Currency (OCC) said.
The reviews followed the "robo-signing" scandal that emerged
in 2010 involving allegations banks pursued faulty foreclosures
by using defective or fraudulent documents.
Bank of America Corp, Citigroup Inc, JPMorgan Case & Co
, Wells Fargo & Co, MetLife Bank, and five others will
pay $3.3 billion directly to eligible borrowers, and $5.2
billion in loan modifications and forgiveness, regulators said.
The OCC and the Federal Reserve Board said they accepted the
agreement to get relief to consumers more quickly than through
the reviews.
In April 2011, the government required the servicers to
review foreclosure actions from 2009 and 2010 to determine
whether borrowers had been unlawfully foreclosed on or suffered
some other financial harm due to errors in the foreclosure
process.
Comptroller of the Currency Thomas Curry said in a
statement: "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."
The agreement announced Monday resolves matters left
unsettled by a $25 billion deal that the top five servicers
reached last February with the Justice Department, housing
authorities and state attorneys general to end an investigation
into foreclosure practises including robo-signing.
Those authorities had taken a broad approach to dealing with
allegations of robo-signed documents and faulty foreclosures,
while the bank regulators had initially opted for the more
targeted, individual reviews.
Bank of America said it supports the new approach "because
it expands the number of borrowers who will receive payment,
speeds the delivery of those payments, and will provide support
for homeowners still struggling to make payments."
MetLife said it was fully cooperating with the OCC review
process and said its portion of the settlement was $37 million.
The other servicers said they were pleased to reach the
settlement.
Regulators said the agreement replaces the case-by-case
reviews with a broader framework, which allows borrowers to
receive compensation regardless of whether they faced actual
harm.
Instead the payouts will be based on whether a borrower
falls into one of 11 categories, ranging from whether the person
was eligible for protections under the Servicemembers Civil
Relief Act, whether the borrower was not in default, or whether
he or she was denied a loan modification, for example.
The other banks involved in the settlement are: Aurora
, PNC, Sovereign, SunTrust
, and U.S. Bank.
Regulators are continuing negotiations whether four other
servicers, and are also expected to enter into similar
settlements with them.
At least one lawmaker expressed disappointment in the
settlement. Elijah Cummings, the top Democrat on the House
Committee on Oversight said he had serious concerns that the
deal "may allow banks to skirt what they owe and sweep past
abuses under the rug without determining the full harm borrowers
have suffered."
On Friday Cummings and Oversight Committee Chairman Darrell
Issa sent a letter to the agencies requesting a briefing on the
settlement.
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