Major banks close to big settlement on home loans

Mon Dec 31, 2012 12:07pm EST

A sign offering bank owned homes for sale is seen in a subdivision in Maricopa, Arizona in this file photo from May 27, 2009. REUTERS/Joshua Lott/Files

A sign offering bank owned homes for sale is seen in a subdivision in Maricopa, Arizona in this file photo from May 27, 2009.

Credit: Reuters/Joshua Lott/Files

(Reuters) - U.S. regulators are close to securing another multibillion-dollar settlement with the largest banks to resolve allegations that they unlawfully cut corners when foreclosing on delinquent borrowers, a source familiar with the talks said.

The settlement with five big banks would be part of a larger deal that the Office of the Comptroller of the Currency hopes will include 14 banks and total about $10 billion, the source said.

Such a settlement would address an outstanding issue that was left unsettled after the $25 billion deal that the banks reached in February with the Justice Department, housing authorities, and state attorneys general.

In 2011, the OCC had separately required the big banks to "look back" and compensate borrowers wrongfully foreclosed upon in 2009 and 2010. It appears that the case-by-case analysis is proving too cumbersome, and the banks are instead opting for a lump-sum settlement.

The top five mortgage lenders -- Bank of America Corp, Wells Fargo & Co, JPMorgan Chase & Co, Citigroup Inc and Ally Financial Inc -- may reach a deal in the coming days, the source said.

The largest banks would pay the majority of the $10 billion target. That money would be paid out to a group of borrowers foreclosed upon during the period of time covered by the review, said the source, who was not authorized to speak publicly.

The OCC and the banks are still negotiating how to calculate individual payouts, the source said, adding that regulators will give the banks credit for compensation they have already given borrowers as part of ongoing foreclosure reviews.

The New York Times first reported the pending deal.

"The Office of the Comptroller of the Currency is committed to ensuring the Independent Foreclosure Review proceeds efficiently and to ensuring harmed borrowers are compensated as quickly as possible," the OCC said in a statement.

Ally, Wells Fargo, JPMorgan, Bank of America and Citigroup declined to comment.

(Reporting by Aruna Viswanatha, with additional reporting by Sakthi Prasad, Rick Rothacker and Douwe Miedema; Editing by Leslie Gevirtz)

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Comments (3)
altalks21 wrote:
As punishment,Banks should be required to help homeowners that are underwater, to obtain loan modifications/ refinancing (no short sales), to help keep their homes.

Dec 31, 2012 8:25pm EST  --  Report as abuse
Sampall wrote:
While I applaud your reporting, I am still confused as to why nobody is reporting the fact that millions of homeowners (like me) are being overlooked and abandonned by this supposed bank settlement.

Because I have had 3 different servicers, and none of them are on the list (Fremont Investment & Loan, Litton Loan Servicing, and now Ocwen Financial) I get no foreclosure review, no compensation for the financial and emotional carnage I have had to deal with…nothing.

If a woman is raped, is it her financial responsibility to catch the rapist? to Hire an attorney and prosecute the rapist? Then why am I forced to fight multiple financial behemoths when they are clearly guilty of the largest attempted mass genocide in human history? It’s not just the money…. We are being murdered and nobody is even attempting to report it.

Dec 31, 2012 8:50pm EST  --  Report as abuse
LompocDad wrote:
Hey @Sampall,

If I am not mistaken, Fremont was part of Wilshire Credit which is now owned by BofA. I was with Fremont, but they got bought out. Check into it. I just called the Independent Foreclosure number and the lady on the phone said everything was still ongoing. She had no idea about the settlement taking place. But with 3.75 billion, that wont leave anything in our pockets if we do even see a dime. The national mortgage settlement provided 1.5 bil for 750k home owners, which was about $1500-2k. With this $3.75bil, amongst 4.4 million people, sounds like a potential free happy meal at McDonalds. Hope I am wrong though.

Jan 02, 2013 4:48pm EST  --  Report as abuse
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