The Office of the Comptroller of the Currency (OCC) regulates nationally chartered banks. Two days ago the OCC unveiled an $8.5 billion settlement with 10 large banks that service mortgages.
Under the terms of the settlement, more than 3.8 million borrowers who faced foreclosure between Jan. 1, 2009 and Dec. 31, 2010 qualify to get some payment regardless of whether they actually suffered any harm.
The mortgage servicing banks involved in the settlement are Bank of America, Wells Fargo, Citibank, JPMorgan Chase, SunTrust, PNC, Sovereign, U.S. Bank, MetLife Bank and Aurora.
The agreement provides for $3.3 billion to go directly to borrowers. Another $5.2 billion is earmarked for loan modifications and the forgiveness of deficiency judgments.
The OCC said the amount that eligible borrowers get would range from a few hundred dollars up to $125,000, depending on the type of error that possibly occurred in their mortgage servicing.
“If a borrower went through foreclosure with one of those 10 lenders, they should receive a couple hundred bucks, whether they deserve it or not,” said Guy Cecala, publisher and CEO of Inside Mortgage Finance Publications in Bethesda, Md., which tracks news and statistics in the residential mortgage industry. “The odds of getting $125,000 are the odds of winning the lottery. It would have to be a false foreclosure or where they were thrown out of their house illegally.”
OCC spokesman Bryan Hubbard said borrowers will be compensated based on which category of possible error they fit without delving in to the facts of their situation.
“Some people will receive a check who had no error. That is absolutely true,” Hubbard said.
He acknowledged: “There may be people who are undercompensated. But they give up nothing by accepting the money and they may pursue whatever other remedies are available to them.”
Borrowers and consumer advocates have been mostly skeptical about the OCC deal.
Fueling consumers’ skepticism: A $25 billion settlement last spring between 49 state attorneys general and five big banks has yet to provide much help to consumers. The state of Florida is just now ready to decide how to spend part of its share. Jan. 18 is the deadline for homeowners to file a claim under that settlement. Details are available at nationalmortgagesettlement.com.
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