Some 3.8 million homeowners will share in an $8.5 billion settlement over improper foreclosure and mortgage servicing practices, the Federal Reserve and Office of the Comptroller of Currency (OCC) has announced.
The agreement, reached with 10 of the nation's largest mortgage servicers, benefits homeowners who were in foreclosure in either 2009 or 2010. It provides for $3.3 billion in direct cash payments and $5.2 billion in other assistance, such as loan modifications or forgiveness of deficiency judgments.
Up to $125,000 for individual borrowers
Individual homeowners will receive compensation ranging from several hundred dollars to as much as $125,000, depending on the nature of the error made in foreclosing on or servicing their mortgage.
The agreement resolves enforcement actions put into place against the mortgage servicers in April 2011 as a result of deficient practices in mortgage servicing or foreclosing on mortgages. The agreement announced January 7th is separate from and in addition to the $25 billion settlement reached last year among certain mortgage servicers, state attorneys general and the federal government over improper foreclosure and loan servicing practices related to the robosigning scandal.
Those eligible to be contacted
The agreement puts to an end the Independent Foreclosure Review, which involved case-by-case examinations of foreclosures conducted during 2009-10, and replaces it with a broader process intended to provide individual borrowers with relief more quickly. Eligible borrowers are scheduled to be contacted by the end of March with details about compensation; borrowers need not have submitted a request for review to be eligible.
The settlement stems from claims that some borrowers had their homes improperly foreclosed on in the wake of the 2008 economic crash and that mortgage servicers mishandled applications for loan modifications by others.
Mortgage servicers participating in the agreement include the nation's four largest banks, Bank of America, Citibank, JP Morgan Chase and Wells Fargo, as well as Aurora Banks FSB, MetLife, PNC, SunTrust and US BankCorp. The Federal Reserve and OCC are continuing to work toward reaching an settlement with other mortgage servicers who are not a part of the agreement.
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