By Aruna Viswanatha
WASHINGTON Feb 28 Borrowers whose homes were
foreclosed on during the U.S. housing crisis will start
receiving payments in April from a $3.6 billion fund under a
previously announced settlement with 13 banks, regulators said
Certain borrowers whose mortgages were serviced by one of
the 13 banks can expect to receive between a few hundred dollars
and $125,000, under settlements designed to end case-by-case
reviews of past foreclosures.
The Office of the Comptroller Currency and the Federal
Reserve in 2011 ordered banks including Bank of America Corp
, JPMorgan Chase & Co, and Wells Fargo to
review individual loan files after widespread mistakes were
discovered in the way mortgage servicers had processed home
The reviews were initially expected to determine which
borrowers were harmed and to compensate them based on their
individual experiences. The process proved slow and expensive,
though, with more than $1.5 billion going to consultants.
In January regulators replaced the reviews with about $9.3
billion in settlements, including $3.6 billion in cash payments
to foreclosed borrowers. Struggling borrowers will receive the
rest of the money in the form of assistance, including loan
modifications and forgiveness.
By the end of March, regulators will provide information
about the payments to borrowers who fall into one of 11
categories, including those eligible for protections under the
Servicemembers Civil Relief Act, those who were not in default
when foreclosed on, and those denied a loan modification, the
Regulators are still determining how many borrowers fall
into each category, OCC Deputy Comptroller Morris Morgan said on
a conference call with reporters. Once they have that figure,
they can calculate how much money each borrower is likely to
receive, he said.
DECLINING ERROR RATE
The OCC and the Fed have faced criticism from Congress over
both the reviews and the settlement that ended them. Lawmakers
have asked for more information about the consultants who
conducted the reviews and what they turned up.
Regulators initially said about 6.5 percent of the loans
reviewed appeared to have some errors. On Thursday Morgan said
that error rate had declined, but did not provide a specific
The banks are expected to try to keep borrowers in their
homes, but the settlement does not mandate specific kinds of
The servicers will receive varying degrees of credit for
modifying first and second loans, waiving deficiency judgments,
offering short sales, and other types of relief.
Three servicers subject to the original reviews, Everbank
, OneWest and GMAC Mortgage, did not enter into the
settlements and will continue their reviews, the OCC said.