Federal regulators on Monday reached an $8.5 billion settlement with 10 major lenders to resolve claims of foreclosure abuses, including the use of flawed paperwork and bungled loan modifications that may have led to wrongful evictions.
The settlement, which includes the nation’s largest lenders — like Bank of America, JPMorgan Chase, Wells Fargo and Citigroup — concludes weeks of negotiations between the banks and the federal regulators, led by the Office of the Comptroller of the Currency.
It is intended to end a troubled foreclosure review of millions of loan files that was mandated by the banking regulators. Among the problems that came to light in the last several years were sloppy record-keeping and so-called robo-signing, in which foreclosures were made based on forged or unreviewed documents.
Notably, four banks — Ally Financial, HSBC, OneWest Bank and Everbank — that were originally part of the negotiations, did not sign on to the deal.
Under the settlement, $3.3 billion in cash relief will go to borrowers who went through foreclosure in 2009 and 2010. The remaining $5.2 billion will be directed to homeowners in danger of losing their homes and will be used to reduce the amount of principal owed or the monthly payments, for example. Individual payments under the settlement, which covers 3.8 million households, could be as much as $125,000.