Banks Reach $8.5 Billion Foreclosure Settlement
On Monday, ten U.S. banks agreed to pay $8.5 billion to settle regulator’s accusations that they didn’t follow the correct foreclosure process and made errors in the loan process. This includes the robo-signers used to sign off on thousands of foreclosure cases instead of a personal review of each one.
Banks will pay $3.3 billion of the $8.5 billion settlement to more than 3.8 million eligible borrowers who were foreclosed on in 2009 or 2010. The remaining $5.2 billion will be in loan modifications and forgiveness on the outstanding principal on homes that sold for less money that what some borrowers owed on their mortgages.
This settlement is in addition to the one reached a year ago when five financial institutions–Bank of America, Chase, Wells Fargo, Citigroup and Ally Financial–paid $25 billion over accusations of foreclosure abuses. That settlement included a mix of cash payments to borrowers and aid such as mortgage modifications that reduced loan balances.
The Consumer Finance Protection Bureau is expected to issue new home-lending rules this week and bring more standardization to mortgage loans. There could be some protest as the CFPB attempts to determine the types of loans that banks can offer, the terms of these loans, and to whom the loans can be offered.