The country’s biggest mortgage servicers have reached an agreement with federal banking regulators that will end foreclosure reviews required under consent orders issued nearly two years ago.
Consent orders were issued in April 2011 by the Office of the Comptroller of the Currency against several super-sized servicers. The orders required independent reviews of their foreclosure actions in 2009 and 2010 to determine whether foreclosures were properly conducted.
But while the consulting firms hired to conduct the foreclosure reviews have earned hundreds of millions of dollars, few of the impacted borrowers have benefited.
So 10 of the servicers — Aurora, Bank of America, Citibank, JPMorgan Chase, MetLife Bank, PNC, Sovereign, SunTrust, U.S. Bank, and Wells Fargo — have agreed to forego the independent foreclosure reviews in return for direct payments of $3.3 billion to eligible borrowers and $5.2 billion in other assistance, according to a statement from the OCC.
Other assistance includes loan modifications and forgiveness of deficiency judgments.
“The OCC and the Federal Reserve accepted this agreement because it provides the greatest benefit to consumers subject to unsafe and unsound mortgage servicing and foreclosure practices during the relevant period in a more timely manner than would have occurred under the review process,” the regulator stated.
Individual borrowers will receive up to $125,000 depending on the type of servicer error involved. No forms need to be filed by borrowers in order to receive compensation. The agreement ensures that impacted borrowers will receive compensation more quickly.
A payment agent will be appointed on behalf of the servicers to administer borrower payments. Borrowers won’t have to waive any legal claims against their servicers in order to receive payments.
“The agencies continue to work to reach similar agreements in principle with other servicers that are not parties to the agreement announced today, but that are also subject to enforcement actions for deficient practices in mortgage loan servicing and foreclosure processing,” the OCC said.