14 Banks Likely to Accept another Foreclosure Settlement

By Stevie Duffin Updated on 12/31/2012

By Daniel Duffield

In order to put an end to allegations of abuse with regards to foreclosure procedures, banks will likely pay an additional $10 billion after a previous foreclosure settlement. According to a report to the New York Times, the settlement would conclude all federal investigations of foreclosure wrongdoing with respect to flawed paperwork and illegally inflated fees.

However, in contrast to the previous $25 billion settlement that was finalized earlier in 2012, the bulk of the settlement would go to homeowners, with approximately $3.75 billion going to compensate borrowers that had already been forced into foreclosure and eviction from their homes. Additionally, roughly $2.25 billion would compensate borrowers who are currently at risk of foreclosure within their homes by reducing the principal balances of their mortgages or helping them to acquire either a loan modification or home refinance. From the previous lawsuit settlement, $1.5 billion was issued as cash relief for borrowers, although some states have attempted to reroute some of these funds to state treasuries.

The New York Times indicates that one of the potential obstacles of this agreement has been the expense for banks to perform a thorough and independent investigation of the numerous loan files in question, totaling 4 million. In 2011, the Office of Comptroller of the Current and Federal Reserve ordered these banks to complete these reviews by working with professional consultants to inspect files with illegitimate fees, illegal requirements regarding insurance rights, and overvalued loan payment amounts. The price to conduct these reviews has grown tremendously from original estimates, with some inspections requiring as much as 20 hours of time with consultants who demand $250 hourly. Furthermore, some have suggested that these investigations did not even yield the required information which government agencies were requesting. Thus, the settlement could not proceed through these inaccurate and costly reviews.

According to the Times, negotiations for these allegations have proceeded with much discretion, and many housing analysts were unaware of the proceedings of these talks. While a settlement could be decided upon by the end of this week, such an agreement would not fully resolve what homeowners would receive money or how and when they would be able to claim it.

The newspaper did not provide a list of all of the banks involved within this lawsuit; although it did provide the names of those who were involved in the $25 billion deal, including Wells Fargo, JPMorgan Chase, Citi, Bank of America and Ally Bank.