The Office of the Comptroller of Currency announced they are close to a $10 billion settlement with 14 banks related to the U.S. government’s efforts to hold lenders responsible for foreclosure abuses. The announcement comes after just one month of secret talks between regulators and lenders. Among the lenders included in the negotiations are JP Morgan Chase, Bank of America, Wells Fargo, Citigroup, and Ally financial. This tentative agreement is the latest in a series of settlements between regulators, law enforcement officials, and banks in an effort to hold lenders accountable for their role in the 2008 financial crisis and subsequent housing market slump.
The abuses cited include faulty paperwork, excessive fees and/or illegally charged fees, forcing homeowners into costly insurance, miscalculating loan payment amounts, and wrongful evictions. The proposed settlement came after failed attempts by independent consultants to review the bank’s loan records – efforts which were both costly (approximately $1.5 billion in fees) and time consuming (each individual review taking up to 20 hours to complete).
As part of the proposed settlement, $6 billion would be set aside for relief to current homeowners including reducing principle, refinancing high interest rate mortgages, and donating abandoned homes. In addition, $3.75 billion would go to individuals who have already lost their homes. The proposed settlement would also halt a consent order requiring a sweeping review of over four million bank loan files.
In addition to these efforts, federal agencies including the Security and Exchange Commission and the Justice Department continue to pursue these banks for the packaging and sale of troubled mortgage securities that imploded during the financial crisis.