NEW YORK ( TheStreet) -- Ten major mortgage servicers including Bank of America (BAC), JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC) have entered into a $8.5 billion settlement with regulators to settle claims related to foreclosure abuses.
Under the terms of the settlement with the Federal Reserve and the Office of the Comptroller of the Currency(OCC), the banks will pay $ $3.3 billion in direct payments to eligible borrowers and $5.2 billion in other assistance, such as loan modifications and forgiveness of deficiency judgments. The agreement covers 3.8 million borrowers whose homes were in foreclosure in 2009 and 2010 with the participating servicers.
By agreeing to the settlement, the lenders can cease the independent foreclosure review process mandated under an enforcement action in April 2011.Regulators had determined that the foreclosure review process, which involved a case-by-case review of millions of loan files, was proving too expensive, time consuming and ineffective. "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. 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," OCC chief Thomas Curry said in a statement. "We have learned a great deal from the reviews that have been conducted to date. However, 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. Our new course of action will get more money to more people more quickly, and it will speed recovery in the nation's housing markets," he said. Earlier press reports had suggested that 14 lenders would be participating in a settlement totaling $10 billion. The settlement comes nearly a year after a separate $26 billion mortgage settlement with the five biggest banks in relation to the "robo-signing" scandal. Only $1.5 billion of that settlement was in the form of direct cash relief to 750,000 borrowers. Eligible borrowers under the latest settlement will receive compensation whether or not they filed a request for review form, and borrowers do not need to take further action to be eligible for compensation, according to the OCC release. Borrowers are expected to be contacted by the payment agent by the end of March with payment details. Borrowers will not be required to execute a waiver of any legal claims they may have against their servicer as a condition for receiving payment. In addition, the servicers' internal complaint process will remain available to borrowers, according to the statement. --Written by Shanthi Bharatwaj in New York
>To contact the writer of this article, click here: Shanthi Bharatwaj. >To follow the writer on Twitter, go to http://twitter.com/shavenk. >To submit a news tip, send an email to: email@example.com.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV