The new deal – agreed to in principle by federal regulators and 10 mortgage servicers – provides the largest cash payments so far to borrowers in compensation for foreclosure abuses.
Borrowers involved in a foreclosure case in 2009 or 2010 handled by one of the servicers will be notified of their eligibility by the end of March, says Bryan Hubbard, a spokesman for the Office of the Comptroller of the Currency.
The settlement replaces one reached in 2011 in which 14 servicers agreed to check foreclosure cases for mistakes and compensate victims. That process was too slow, resulting in large payments to consultants to check case files but nothing yet to consumers, regulators say. Only 495,000 people out of almost 4.4 million even requested reviews, the OCC says. It was overseeing the reviews along with the Federal Reserve.
With the new process, 3.8 million eligible home loan borrowers will get some compensation, whether or not they suffered a foreclosure error, regulators say.
The payouts will range from hundreds of dollars for minor issues, such as a small improper fee, up to $125,000 if an active duty service member was improperly foreclosed upon, the OCC says.
In addition, the servicers will provide $5.2 billion in mortgage relief, which is expected to include loan modifications, principal reductions and short sales.
That relief can go to any distressed borrower, the OCC says, meaning that more than 3.8 million previous and current home loan borrowers could benefit from the settlement.
The 10 servicers are Bank of America, JPMorgan Chase, Citibank, Wells Fargo, Aurora, MetLife Bank, PNC, Sovereign, SunTrust and U.S. Bank. Discussions are continuing with other servicers, the OCC says.