Banks to start making foreclosure payments

MarketWatchApril 9, 2013 

Money in hand

Banks this week will start making payments to millions of borrowers who were foreclosed on at the height of an era where wrongful actions were taken, federal regulators announced Tuesday.

DANI SIMMONDS

— Banks this week will start making payments to millions of borrowers who were foreclosed on at the height of an era where wrongful actions were taken, federal regulators announced Tuesday.

Payments to 4.2 million borrowers whose homes were in any stage of foreclosure in 2009 or 2010 will begin Friday, the Federal Reserve and the Office of the Comptroller of the Currency said Tuesday.

The payments, which will range from $300 to $125,000, will be sent in several waves and are expected to be completed by mid-July.

The $125,000 payments will go to 1,082 service members who were foreclosed upon, in addition to 53 civilians who were foreclosed on when they weren’t in default. But most borrowers will get between $300 and $800.

The payments are being made to compensate for the “robo-signing” scandal, when bank employees falsely attested that foreclosure documents were correct without reviewing them.

The regulators had previously announced the payments, which replaced a program that had consultants review foreclosures for errors that has drawn fire on Capitol Hill. The Senate Banking Committee on Thursday will hear from officials at the OCC and the Fed as well as from two consultants, Promontory Financial Group and PricewaterhouseCoopers.

While the consultants have come under fire for the fees they have charged for a program that only haltingly and inconsistently compensated foreclosure victims, a review by the Government Accountability Office assigned much of the blame to the regulators for not providing consistent guidance.

The payments come on mortgages serviced by 11 of 13 big servicers and won’t prevent borrowers from taking any legal action related to their foreclosure.

The servicers who are part of the settlement are: Aurora, Bank of America, Citibank, Goldman Sachs, HSBC, JPMorgan Chase, MetLife Bank, Morgan Stanley, PNC, Banco Santander’s Sovereign, SunTrust, U.S. Bank and Wells Fargo.

The regulators still have not reached agreement on ending the independent foreclosure review with OneWest, Everbank and GMAC Mortgage.

Foreclosure activity has dropped sharply as the U.S. economy has improved and the jobless rate has fallen. According to RealtyTrac, there were 25 percent fewer properties that received a foreclosure filing in February than in the same month of 2012.

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