Us Victims Of Faulty Forelosures See Compensation At Last
News Posted On: 13 April 2013
America’s borrowers who have been waiting for compensation for mortgage-related abuses have finally heard how much they will receive – and it’s likely to be around $1,000 apiece, often less.
Around 4 million borrowers will have to share the $3.6bn pot allocated to them as part of a settlement between federal regulators and banks accused of foreclosure processing mistakes.
The banks involved are Bank of America Corp, Wells Fargo & Co., J. P. Morgan Chase & Co., and Citigroup Inc., as well as several other, smaller players.
US regulators said that banks wrongfully foreclosed and repossessed homes from 1,082 borrowers serving in the US armed forces, and another 53 borrowers were found to have lost their homes despite not actually having defaulted on their loans at all. These people will each receive $125k
But most US property borrowers will see far less than this. About 80% will receive amounts between $300 and $1,000, according to the Office of the Comptroller of the Currency and the Federal Reserve. And banks may have compensated borrowers, but they have not acknowledged any wrongdoing, in order to protect themselves from legal actions and negative publicity. That’s a story that will be familiar to UK readers from the behaviour of UK banks taken to court for their unfair overdraft and service fees. In many of those cases, banks settled out of court with ‘goodwill payments’ in the thousands.
Bank regulators in the USA ordered an independent review of banks’ foreclosure files in April of 2011, to determine the number of borrowers who were owed compensation for faulty foreclosure procedures. Earlier this year, the regulators and banks halted the review, arguing that the probe was likely to continue indefinitely and costs were spiralling. The settlement reached was $9.3bn, which includes $5.7bn in non-cash assistance and $3.6bn in cash payments.
There are sharp differences in the way people can expect to be treated under the settlement, though. You’re best off if you took advantage of the opportunity to request a review of your own foreclosure file: about 439k of the people expecting payments under the settlement did this and they can expect twice as much compensation as those who didn’t request a review.
Meanwhile, you’re worst off if you didn’t ask for a review, asked for loan assistance and didn’t get it or didn’t qualify for it. While there’s no legal requirement for banks to provide loan assistance, many publicly pledged to do so and appear to have failed their customers.
Alys Cohen, National Consumer Law Center staff attorney in Washington, summed up the views of many when she described the settlement as ‘cold comfort for many folks who were harmed, especially those who qualified for modifications but didn’t get them.’ While the money will be a major help to some, many will receive sums too small to make a real difference, and certainly not enough to compensate them for their losses.
However, Morris Morgan, the Comptroller, told reporters back in February that some smaller-sum awards would go to borrowers whose foreclosures were correctly executed.
The settlement will have no effect on consumers’ rights to pursue individual lawsuits against their banks – but it will also have no effect on the damage to the credit ratings of those who were foreclosed upon. Specifically the settlement places no requirements on banks to notify credit bureaus of the circumstances of their customers’ foreclosures.
Written by Les Calvert writing about US property.
Back to news articles for this country