By: Michelle Patana
Several lawsuits were launched by homeowners during the robo-signing scandal against banks that they allegedly foreclosed on them improperly. After an extensive review of certain institutions' banking strategies, foreclosure procedures and documentation management, 10 of the nation's largest banks have agreed to an $8.5 billion dollar settlement for foreclosure abuse.
The settlement falls on the heels of a 2011 federal enforcement action, which consisted of an extensive review of banks' foreclosure practices. These banks include JPMorgan Chase, Citibank, MetLife, PNC, Wells Fargo and Bank of America. The $8.5 billion settlement will be divided up between direct payments to wronged homeowners - $3.3 billion - and assistance to loan modification programs and forgiveness of deficiency judgments - $5.2 billion. Separately, Bank of America also agreed to an $11.6 billion dollar payment to Fannie Mae as a settlement for claims against bad mortgages that facilitated the housing market crash.
During the review, regulators found that banks had improperly handled paperwork and ignored several key steps in the foreclosure process to quicken the proceedings. In response to the settlement, which was announced jointly by the Federal Reserve and the Office of the Comptroller of the Currency, consumer advocates said that the end result was not enough. For example, the National Consumer Law Center said regulators settled at too low a price, and that consumers who lost their homes deserved more. Compensation individual consumers may receive under the settlement ranges from $1,000 to $125,000 depending on the scope of banks' offenses, The Association Press reports.
Many of the banks involved in the settlement said they are pleased with the settlement and are confident the funds will help homeowners recoup losses in an expedited manner.