Banks settle again, homeowners to get relief
In a costly day of legal settlements, 10 banks agree to pay $8.5 billion to four million homeowners for mishandling their foreclosures.
In separate settlements Monday, banks agreed to part with nearly $19 billion. Bank of America bore the brunt of the punishment. It agreed to pay more than $10 billion to Fannie Mae for troubled home loans sold by the bank’s Countrywide unit. In the other settlement, 10 mortgage servicers -- including Bank of America and Chase -- agreed to pay $8.5 billion to resolve those sloppy foreclosures, including the ones that were robo-signed.
Add today’s tally to a $25 billion settlement with state attorneys-general last year, among others, and you get the equivalent of some countries’ gross domestic product.
Of today’s two settlements, only one helps homeowners directly. The Federal Reserve says 3.8 million people will get some kind of compensation from the 10 banks that signed onto to the deal. How much? Anywhere from a few hundred bucks all the way up to $125,000, but for most homeowners who faced foreclosure, it won’t be much.
“Two thousand dollars or $200 doesn’t make a difference in people’s lives,” says Diane Thompson, of counsel at the National Consumer Law Center. She says the headline numbers sound like a lot, but when spread out over many banks and many people, it’s no longer big money.
“Banks have gotten off very lightly and have largely been able to structure settlements to their advantage,” Thompson says.
For the banks involved, today’s $8.5 billion settlement ends a slow and costly review of foreclosure cases. The new deal is designed to give more people more money more quickly. But these settlements are a balancing act.
“You’re trying to deliver relief to a large number of people, you’re trying to do it quickly, and you’re balancing that against accuracy,” says Katherine Porter, a law professor appointed to monitor payments to California homeowners under last year’s $25 billion settlement.
Porter says today’s deal could bring some relief to homeowners facing foreclosure who were not covered last year. And, some might actually get help from both agreements.
Payment to many homeowners from today’s settlement is expected to come by the end of March: just in time to pay taxes.