Ten big U.S. mortgage lenders have agreed to pay a combined $8.5 billion to settle charges the banks improperly handled foreclosures in the wake of the housing crisis of 2008, in some cases wrongly seizing homes.
Named in the settlement were some of the biggest names in mortgage lending business, including Bank of America (NYSE: BAC), Citigroup (NYSE: C) and J.P. Morgan Chase (NYSE: JPM).
Under the settlement regulators and the lenders have agreed to end case-by-case reviews of thousands of allegations of abuse leveled at the banks by homeowners.
The banks have agreed to pay $5.2 billion in mortgage assistance and $3.3 billion in direct payments to homeowners who filed complaints, according to the settlement announced by the Office of the Comptroller of the Currency and the Federal Reserve.
The settlement arose out of a 2011 deal the banks reached with regulators after numerous lawsuits were filed alleging mortgage processors routinely rubber stamped foreclosure applications, often barely looking at the paperwork.
Borrowers could receive compensation ranging from several hundred dollars for minor errors to a maximum amount of $125,000 if major mistakes occurred.
Comptroller of the Currency Thomas Curry said in a statement released Monday: “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.”
In addition to Bank of America, Citigroup and J.P. Morgan Chase, these lenders also joined the settlement: Aurora Bank FSB, MetLife (NYSE: MET), PNC Financial Services Group (NYSE: PNC), Sovereign Bank, SunTrust Banks Inc. (NYSE: STI), US Bancorp (NYSE: USB) and Wells Fargo & Co. (NYSE: WFC).
Bank of America said in a statement: “Bank of America joined the nation’s largest mortgage servicers, the OCC and the Federal Reserve in signing agreements in principle that put in place an alternative to the Independent Foreclosure Review that will deliver cash payments and other assistance to help home borrowers. We support the new approach because it expands the number of borrowers who will receive payment, speeds the delivery of those payments, plus it will provide support for homeowners still struggling to make payments and encourage continued community stabilization efforts and recovery of the housing market.”
Citigroup said in a statement: “We are pleased to have the matter resolved and believe this agreement is a positive development that will provide benefits for homeowners.”
J.P. Morgan said also in a statement: “We worked very hard over the last eighteen months fulfilling our obligations under the Independent Foreclosure Review and are pleased to have it now behind us. We have helped nearly one million homeowners avoid foreclosure over the last four years and will continue to help others who may be struggling to make their payments.”
MetLife's statement read: “MetLife has been fully cooperating with the OCC look back process and has agreed to join the settlement with the major banks. MetLife’s portion of the $8.5 billion settlement is $37 million pre-tax and is not material to the company. We are happy to reach a resolution of this matter.”
The other banks did not immediately respond to requests for comment by FOXBusiness.
Regulators said only a fraction of eligible borrowers applied by the Dec. 31 deadline to have their paperwork reviewed for improprieties. More than 4 million homeowners were reportedly eligible.
Since the initial deal was reached more than a year ago no homeowner has received compensation in return for having their foreclosure process mishandled.