In addition to Bank of America, Citibank and JPMorgan, today’s settlement with the Fed and OCC covers Aurora Bank FSB, MetLife Inc., PNC Financial Services Group Inc., Sovereign Bank, SunTrust Banks Inc., US Bancorp and Wells Fargo & Co., the biggest U.S. home lender.
The agreement drew criticism from Representative Elijah Cummings of Maryland, the top Democrat of the House Oversight and Government Reform Committee.
“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 in a statement.
Cummings and Representative Darrell Issa, the California Republican who leads the oversight panel, sent a letter to regulators last week requesting that they be briefed on the agreement and have questions answered before it was completed.
The accord is meant to speed up payments to borrowers who otherwise would have continued to wait under the case-by-case review. Eligible borrowers are expected to get payments of as much as to $125,000, depending on how badly their foreclosure was handled, the regulators said, similar to compensation levels the agencies outlined last year.
A payment agent will act as go-between for payments, and eligible borrowers should expect to be contacted by the end of March, according to the regulators.
The remaining $5.2 billion will go toward modifying loans and forgiveness of deficiency judgments, according to the settlement. The regulators said they will keep trying to secure settlements with mortgage servicers outside of today’s deal.
“If the reviews had been done right the first time, banks would have been on the hook to pay far more to homeowners, even though the planned scheme for recompense fell far short of full compensation,” said Alys Cohen, staff attorney for the National Consumer Law Center, in a statement.
About 495,000 borrowers applied by the earlier settlement’s Dec. 31 deadline to have their foreclosure histories examined for missteps. Another 159,000 foreclosures were chosen in a sampling process, according to the OCC. The new settlement’s payouts will be dispersed among more than 3.8 million who went through foreclosures in 2009 or 2010.
The existing process to make up for bad foreclosures had failed to compensate any of the borrowers in the nearly two years since the accord was in place.