A man walks past a Wells Fargo location in Philadelphia. (Matt Rourke / Associated…)
WASHINGTON -- Ten of the nation's largest mortgage servicers have agreed to an $8.5-billion settlement with federal regulators to end a review of foreclosure abuses.
The settlement, announced Monday, involved some of the biggest names in the financial industry, including Bank of America Corp., Wells Fargo & Co., JPMorgan Chase & Co. and Citigroup Inc..
They agreed to pay a total of $3.3 billion to more than 3.8 million borrowers whose homes were in foreclosure in 2009 and 2010, according to the Federal Reserve and the Office of the Comptroller of the Currency. Borrowers could receive as much as $125,000, depending on the type of problems with their foreclosures.
In addition, the banks agreed to provide $5.2 billion in other assistance to those borrowers, including modifications to their mortgages or having judgments against them forgiven.
The other servicers participating in the settlement are Aurora Loan Services, MetLife Bank, PNC Financial Services, Sovereign Bank, SunTrust Banks and U.S. Bancorp. Four smaller servicers whose foreclosure practices have been under review did not sign on to Monday's settlement.
Under the original plan devised by the comptroller and the Federal Reserve in April 2011, 4.4 million Americans whose homes were in foreclosure proceedings in 2009 and 2010 could request a free review. Only about half a million have done so.
Regulators decided to stop the reviews in exchange for the cash payments and assistance.
Borrowers who requested reviews would get bigger cash payments. Those that did not would get a few hundred dollars. Those who requested reviews would get bigger payments.
"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," said Comptroller of the Currency Thomas J. Curry.
"While today's announcement represents a significant change in direction," he continued, "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."
Curry said that although regulators have "have learned a great deal from the reviews ... it has become clear that carrying the process through to its conclusion would divert money away from the impacted homeowners" and delay compensation to the borrowers.
Rep. Elijah E. Cummings (D-Md.), criticized the decision by regulators to reach a settlement with the mortgage servicers.
"I am deeply disappointed that the OCC and the Federal Reserve finalized this settlement and effectively terminated the Independent Foreclosure Review process before providing Congress answers to serious questions about how this settlement amount was determined, who these funds will go to, and what will happen to other families who were abused by these mortgage servicing companies, but have not yet had their cases reviewed," Cummings said.
He said he didn't know "know what the rush was to make this settlement without answering these key questions" and that he had "serious concerns that this settlement may allow banks to skirt what they owe and sweep past abuses under the rug without determining the full harm borrowers have suffered."