Multi-Billion Dollar Settlements Vague, Replace Foreclosure Reviews
In the wake of ballooning criticism regarding the so-called “independent foreclosure reviews,” two multi-billion settlements have been formally reached by federal regulators and banks accused of major foreclosure abuses.
Our Miami foreclosure lawyers understand that at least one of those deals, the $8.5 billion agreement between the Office of the Comptroller of the Currency and 10 major banks that were initially on board with the foreclosure review process, has been characterized by insiders as “vague. Further, it likely actually amounts to far less than these entities may have had to pay if the review process had been conducted with any modicum of integrity.
It’s unclear how the $8.5 billion number was reached, but we do know that 10 banks will pay out a total of $3.3 billion directly in cash to nearly 4 million homeowners who were eligible for a review. In all, that works out to about $870 for each borrower.
However, it’s expected that the awards will be fluctuating a great deal. The remaining $5.2 billion will be credits that the bank will receive for things like loan modifications and other efforts to help current underwater borrowers avoid foreclosure.
Similar to the $25 billion settlement reached by five major banks last year with attorneys general from 49 states, some have said this is money banks will earn for doing things they were either already doing or should have been doing.
Still, it is worth noting that the deal is intended to mean accelerated payments for those who are owed money. In other words: You’ll get it faster, but it might not be nearly what you’re owed.
Under the review process, homeowners could have been awarded up to $125,000 for foreclosure wrongs.
The $8.5 billion deal effectively ends the foreclosure review process.
That deal involved Bank of America, as did the $25 billion deal. Still, that bank has reached a separate, $10.3 billion settlement agreement with Fannie Mae, the government-backed mortgage firm that purchased questionable home loans from the bank before the housing bubble burst.
The bank has agreed to fork over $3.55 billion in cash, and it will also repurchase an estimated 30,000 of those mortgages that are expected to yield significant losses, paying approximately $6.75 billion for those loans. These were loans that had been packed into mortgage-backed securities and then sold to Fannie Mae, ultimately giving taxpayers a raw deal.
In fact, Fannie Mae reported major losses as a result of these purchases, forcing a complete government takeover and a bailout of $116 billion just to keep it afloat.
These loans were originated by Countrywide Financial, which was a top subprime home lender that was bought by Bank of America in 2009 for $4 billion.
The bank already repurchased some $3 billion worth of bad loans in 2010 from Freddie Mac – a deal many said let BofA off far too lightly. It was also slapped with a $330 million fine two years ago for discriminatory lending practices.
This all sounds like a lot of money, but its unclear how all of this will translate for homeowners who were either victims forced from their homes or who are still struggling as a result.
While federal regulators have issued generalities about how borrowers will be compensated under the $8.5 billion deal, we don’t yet know all the details. We do know that the review process had identified 13 varying categories of potential harm, each with a corresponding price tag for compensation. It’s expected that this payout may mirror that, with lump sums anywhere from a few hundred dollars all the way up to $125,000, but we haven’t been given specifics.
If you have been a victim of wrongful foreclosure or are struggling to avoid it now, call us today to see how we can help.
If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Legal for a confidential appointment to discuss your rights. Call 305-358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Mortgage Wars,” discussing foreclosure topics that matter to YOU.