Lawmakers asks Fed to delay foreclosure deal for review

WASHINGTON Sat Jan 5, 2013 12:19pm EST

U.S. Chairman of the Federal Reserve Ben Bernanke speaks during a news conference in Washington December 12, 2012. REUTERS/Kevin Lamarque

U.S. Chairman of the Federal Reserve Ben Bernanke speaks during a news conference in Washington December 12, 2012.

Credit: Reuters/Kevin Lamarque

WASHINGTON (Reuters) - A U.S. congressional oversight panel asked regulators to delay a multibillion dollar mortgage settlement with 14 large banks so that the lawmakers could review the deal, according to a letter made available on Saturday.

"We would like more information about how the potential settlement amount is to be determined in light of the potential wrongdoing identified to date," said the January 4 letter to Federal Reserve Chairman Ben Bernanke and the Comptroller of the Currency Thomas Curry.

The top Republican and Democratic lawmakers on the House of Representatives Oversight Committee asked regulators how aid may be distributed and in what form, and what may happen to homeowner files that are still awaiting review.

The Wall Street Journal reported that the Federal Reserve was holding up the settlement with banks to resolve allegations that they unlawfully cut corners when foreclosing on delinquent borrowers.

The settlement with five big banks - Bank of America, Wells Fargo & Co, JPMorgan Chase & Co, Citigroup Inc and Ally Financial - 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, a source told Reuters last week.

The deal would potentially compensate borrowers who went through foreclosures in 2009 and 2010, and it was unclear why the Fed had not signed off on it, the Journal said.

The terms under discussion would have 14 large banks pay a total of $3.75 billion in cash and the balance in other forms of borrower relief, the newspaper reported, citing people familiar with the matter.

Spokesmen for the Fed and the OCC were not immediately available for comment.

The Fed and the OCC have disagreed about exactly how payments to consumers under the settlement would be determined, the Journal said. Smaller banks that were concerned that the settlement terms favor larger lenders also opposed the deal, the Journal added.

A majority of the 14 servicers have already agreed to the terms of the deal, which would be in jeopardy if it is not completed this weekend, the Journal said.

(Reporting By Rachelle Younglai; Editing by Vicki Allen)

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Comments (4)
First, the banks were bailed out with taxpayer funds, now they are asked to pay out a portion of those funds back to certain taxpayers that qualify. Maybe one day people will learn that government interference causes the problems in the first place, and demanding that the problem fix its self is no solution. But surely the fireman can always justify his need by becoming the arsonist from time to time. .

Jan 05, 2013 12:50pm EST  --  Report as abuse
jwws9999 wrote:
wasn’t it the lack of government regulation ie the repeal of glass steagal that led to the banks needing to be bailed out. fyi, ayn rand was wrong

Jan 05, 2013 12:58pm EST  --  Report as abuse
bobber1956 wrote:
If there was wrong doing seize the houses and GIVE them back to the borrowers. Let the banks take the full hit for their CRIMES. And THEN fine them.

Jan 05, 2013 3:13pm EST  --  Report as abuse
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