A group of 10 mortgage servicers agreed Monday to pay a total of $8.5 billion to end a U.S. government-mandated case-by-case review of housing crisis foreclosures in an acknowledgment the program had proved too cumbersome and expensive.
Roughly 3.8 million borrowers whose homes were in foreclosure within the time frame of the review will receive cash compensation ranging from hundreds of dollars up to $125,000, depending on the type of errors they experienced, the U.S. Office of the Comptroller of the Currency (OCC) said.
The reviews followed the robo-signing scandal that emerged in 2010 involving allegations banks pursued faulty foreclosures by using defective or fraudulent documents.
Bank of America Corp, Citigroup Inc, JPMorgan Chase & Co, Wells Fargo & Co, MetLife Bank and five others will pay $3.3 billion directly to eligible borrowers, and $5.2 billion in loan modifications and forgiveness, regulators said.
The OCC and the Federal Reserve Board said they accepted the agreement to get relief to consumers more quickly than through the reviews.
In April 2011, the government required the servicers to review foreclosure actions from 2009 and 2010 to determine whether borrowers had been unlawfully foreclosed on or suffered some other financial harm due to errors in the foreclosure process.
“It has become clear that carrying the process through to its conclusion would divert money away from the impacted homeowners and also needlessly delay the dispensation of compensation to affected borrowers,” Comptroller of the Currency Thomas Curry said in a statement.
The agreement announced Monday resolves matters left unsettled by a $25 billion deal that the top five servicers reached last February with the Justice Department, housing authorities and state attorneys general to end an investigation into foreclosure practices including robo-signing.