Banks to pay $3.6 billion to millions of homeowners in wrongful foreclosure settlement
The nation's largest banks will begin sending payments this week to millions of Americans who may have been wrongfully foreclosed on during the housing crisis.
A total of $3.6 billion in cash will be distributed to 4.2 million borrowers who lost their homes or were at risk of foreclosure, the Federal Reserve and the U.S. Comptroller of the Currency said Tuesday. Payments will range from $300 to $125,000. About 90 percent of borrowers whose mortgages were serviced by 11 of the banks will receive payments by the end of April, the agencies said.
The last group of payments is expected in mid-July.
The banks, which include PNC Financial Services, Bank of America, JPMorgan Chase, Wells Fargo and Citigroup, reached a settlement with the federal agencies in January. They agreed to pay a total $9.3 billion in cash and in reductions of mortgage balances.
PNC is paying $69.4 million into the settlement fund, according to the U.S. Comptroller of the Currency. The agency did not have the number of borrowers involved, and PNC declined to comment.
In addition, PNC agreed to provide loss-mitigation and other foreclosure-prevention measures valued at $111 million, the agency said.
The 13 banks settled the regulators' complaints that they wrongfully foreclosed on borrowers with abuses such as “robo-signing,” or automatically signing off on foreclosures without properly reviewing documents.
The settlement covers borrowers whose homes were in any stage of the foreclosure process in 2009 or 2010. It ended an independent review of loan files that the two agencies ordered in 2011.
Banks and consumer advocates had complained that the loan-by-loan reviews were time-consuming and costly and didn't reach many affected borrowers. Some questioned the independence of the consultants who performed the reviews, who often ruled against borrowers.
Consumer advocates have criticized the deal, saying the regulators settled for too low a price by letting banks avoid full responsibility for wrongful foreclosures.
The other banks in the settlement are HSBC, MetLife Bank, Sovereign, SunTrust, U.S. Bank, Aurora, Morgan Stanley and Goldman Sachs.