The Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board have announced a settlement in which 10 mortgage servicing companies will pay more than $8.5 billion in cash payments and other assistance. The new settlement, which was negotiated in secrecy over the past several weeks, is in response to charges of deficient practices in mortgage loan servicing and foreclosure processing by the 10 companies.
‘The agreement ensures that more than 3.8 million borrowers whose homes were in foreclosure in 2009 and 2010 with the participating servicers will receive cash compensation in a timely manner,’ said the regulators in a press statement.
According to the regulators, the sum includes $3.3 billion in direct payments to eligible borrowers and $5.2 billion in other assistance, such as loan modifications and forgiveness of deficiency judgments. Eligible borrowers are expected to receive compensation ranging from hundreds of dollars up to $125,000, depending on the type of possible servicer error.
This agreement includes Aurora, Bank of America, Citibank, JPMorgan Chase, MetLife Bank, PNC, Sovereign, SunTrust, U.S. Bank and Wells Fargo. The regulators add that the companies' fulfillment of the agreement would meet the requirements of the enforcement actions that mandated that the servicers retain independent consultants to conduct an Independent Foreclosure Review.
The OCC and the Federal Reserve said they 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. Eligible borrowers will receive compensation whether or not they filed a request for review form, and borrowers do not need to take further action to be eligible for compensation.’
A payment agent will be appointed to administer payments to borrowers on behalf of the servicers. Eligible borrowers are expected to be contacted by the payment agent by the end of March with payment details. Borrowers will not be required to execute a waiver of any legal claims they may have against their servicer as a condition for receiving payment.Â In addition, the servicers' internal complaint process will remain available to borrowers.Â