What the foreclosure deal mean for eligible borrowers
South Carolinians who learned this week that they are eligible for a cut of $3.3 billion from the lending industry to settle foreclosure abuses don’t have to do much at this point.
Who’s settling? Bank of America, Wells Fargo, Citigroup, JPMorgan Chase, MetLife Bank, PNC, Sovereign, SunTrust, U.S. Bank and Aurora. Others could join the settlement later.
Who’s eligible: Anyone who had a mortgage serviced by any of those firms for a primary residence that was in some stage of foreclosure in 2009-10 will be compensated from a $3.3 billion pool, regardless. About 495,000 borrowers who filed claims under a 2011 settlement will receive extra money, but the amount has not been determined.
Not happy with the amount? Appeals aren’t allowed. Borrowers can still sue their loan servicers.
The other $5.4 billion: Loan servicers will decide how the rest of the mortgage relief money is doled out.
Other loan servicers: HSBC, Ally (formerly GMAC), EverBank and IndyMac were part of the 2011 settlement but not this week’s deal. If they opt out of the new agreement, they will complete their existing foreclosure reviews.
Other questions: The Federal Reserve has a toll-free consumer help-line at 888-851-1920.
But they shouldn’t expect a major financial windfall.
Affected mortgage borrowers will be contacted by late March by a company that will act as the administrator for their claims.
As a precaution, the Federal Reserve said Tuesday that anyone who thinks they qualify should call or write the company that processed their monthly home-loan payments.
That way, these so-called mortgage servicers will have the most up-to-date addresses and other contact information before the official notifications go out.
The agreement announced this week ensures cash compensation for about 3.8 million U.S. borrowers whose primary homes were in some stage of foreclosure in 2009 and 2010 and whose mortgages were being processed by 10 specific banks or loan servicers.
The number of affected households by state was not available.
Banks agreed Monday to pay $8.5 billion to settle charges that they wrongfully foreclosed on home-loan borrowers in the wake of the 2008 financial crisis.
The participating businesses include two of the Charleston region’s largest lenders, Bank of America and Wells Fargo.
The abuses included “robo-signing,” when mortgage firms automatically signed off on foreclosures without properly reviewing all the pertinent documents.
The settlement includes $3.3 billion to homeowners to end a time-consuming and costly review of foreclosures from the two years in question.
The other $5.2 billion will be used to reduce mortgages and forgive mortgage debts that delinquent home buyers owed even after losing their properties.
The Federal Reserve and the Office of the Comptroller of the Currency said borrowers can expect a few hundred dollars to as much as $125,000, depending on the type and number of errors or abuses. Six-figure payments will be the exception.
William H. Harrison Jr., a real estate finance lecturer at the University of South Carolina’s Moore School of Business, said the agreement is akin to “a mortgage class-action settlement” between the lending industry and the federal government.
He said the settlement payments will be based on a form with 11 boxes that represent the various types of errors or abuses.
The more boxes that are checked off, the bigger the check.
“That will determine the amount of your settlement, regardless of who originated the loan and regardless of what your own situation is,” Harrison said. “That’s part of the reason why this is so controversial.”
The Fed and the OCC said they accepted the agreement “because it provides the greatest benefit to consumers subject to unsafe and unsound mortgage servicing and foreclosure practices during the relevant period in a more timely manner than would have occurred under the review process.”
The Associated Press contributed to this report. Contact John McDermott at 937-5572.