Banks agree to pay $8.5 billion for foreclosure abuse
BY Staff and Wire Reports
Tuesday, January 08, 2013
1/08/13 at 7:25 AM
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More than 31,000 mortgage borrowers in Oklahoma are eligible to receive a part of an $8.5 billion settlement announced Monday between regulators and 10 major banks, an official said.
The lenders agreed to settle federal complaints that they wrongfully foreclosed on homeowners who should have been allowed to stay in their homes.
The banks, which include JPMorgan Chase, Bank of America and Wells Fargo, will pay billions to homeowners to end a review process of foreclosure files that was required under a 2011 enforcement action. The review was ordered because banks mishandled people's paperwork and skipped required steps in the foreclosure process.
The settlement was announced jointly by the Office of the Comptroller of the Currency and the Federal Reserve.
No details were available on the amount of compensation going to borrowers in Oklahoma, but there are 31,650 eligible to receive a settlement, said Bryan Hubbard, director of public affairs for the OCC, in an email. It was unknown how many of those may reside in metro Tulsa.
Hubbard noted that the vast majority of the eligible Oklahomans will receive compensation.
The agreements are the banks' latest step toward eliminating hundreds of billions of dollars in potential liabilities related to the housing crisis that crested in 2008. When they release fourth-quarter earnings later this month, the banks hope to reassure investors that they are making progress toward addressing those so-called legacy claims.
But advocates say the foreclosure deal allows banks to escape responsibility for damages that might have cost them much more. Regulators are settling at too low a price and possibly at the expense of the consumer, they say.
"This was supposed to be about compensating homeowners for the harm they suffered," said Diane Thompson, a lawyer with the National Consumer Law Center. The payout guidelines already allowed wronged homeowners less compensation than the actual damages to them, she said.
Under the settlement, people who were wrongfully foreclosed on could receive from $1,000 up to $125,000. Failing to offer someone a loan modification would be considered a lighter offense; unfairly seizing and selling a person's home would entitle that person to the biggest payment, according to guidelines released last summer by the OCC.
The agreement covers up to 3.8 million people who were in foreclosure in 2009 and 2010. All will receive some amount of compensation. That's an average of $2,237 per homeowner, although the payouts are expected to vary widely.
About $3.3 billion would be direct payments to borrowers, regulators said. Another $5.2 billion would pay for other assistance including loan modifications.
Original Print Headline: Banks to pay $8.5B settlement
The Tulsa World Business staff contributed to this story by The Associated Press.
