Federal regulators on Monday announced an $8.5 billion settlement involving 10 banks as a result of alleged foreclosure abuses. The banks involved include Bank of America, JPMorgan Chase, Citibank, PNC, U.S. Bank, Aurora, MetLife Bank, Wells Fargo, SunTrust and Sovereign.
Brokered by the Federal Reserve and the Office of the Comptroller of the Currency (OCC), the deal includes $3.3 billion in direct payments to borrowers as well as $5.2 billion in additional assistance, such as loan modifications and forgiveness of deficiency judgments.
The settlement is separate from the $26 billion foreclosure settlement announced last year. State attorneys general and the Justice Department negotiated that deal, which involved only five major banks: Bank of America, JPMorgan, Citi, Wells Fargo and Ally Financial (formerly GMAC).
Monday's settlement stemmed from a 2011 enforcement action brought by the Federal Reserve and OCC against 14 banks that required them to hire independent consultants to investigate alleged foreclosure abuses and compensate victims.
An estimated 3.8 million borrowers with homes in foreclosure in 2009 and 2010 will receive cash under the settlement. Payments will range from a few hundred dollars to possibly as much as $125,000. Those eligible are expected to be contacted by the end of March, according to regulators.
Further, any struggling borrower whose mortgage is serviced by one of the 10 banks in the settlement is eligible to gain from the $5.2 billion non-cash portion of the deal, for example through a loan modification.