Finally, Chase may have to compensate the people they screwed
From the Wall Street Journal.
U.S. Sets Rules for Foreclosure Compensation
By ALAN ZIBEL
WASHINGTON—Banks could be forced to pay as much as $125,000 per customer to compensate borrowers who were subject to foreclosure-processing errors.
More than a year after finding widespread abuses in the industry, banking regulators unveiled a plan Thursday to compensate borrowers for a wide variety of errors, including starting foreclosure for a borrower who wasn’t in default, denying loan assistance in error, making a mistake on a loan modification and wrongfully foreclosing on a member of the military.
A foreclosed home on Pine Island in Lee County, Fla., in November 2010.
Banks have set aside vast amounts of money for foreclosure-related liabilities, said banking analyst Nancy Bush at SNL Financial. “This would just be an additional drop in the bucket,” she said.
Many borrowers with foreclosure errors may not see any money. Only about 194,000 of 4.4 million borrowers sent letters last year have requested a review of their cases to date. Separately, independent consultants are doing reviews of about 145,000 consumers’ files.
The compensation plan is separate from a $25 billion foreclosure-abuse settlement that federal and state officials announced earlier this year. That settlement covered the nation’s five largest mortgage-servicing firms: Bank of America Corp., BAC +1.53% Wells Fargo WFC +1.45% & Co., J.P. Morgan Chase JPM +1.35% & Co., Citigroup Inc. C +0.57% and Ally Financial Inc..
The Financial Services Roundtable’s Housing Policy Council, which represents banks subject to the review, called the regulators’ action “an important step toward completion” of the foreclosure review process.
The national servicing settlement includes $1.5 billion in cash payments, or up to $2,000 per borrower, for homeowners who went through foreclosure between September 2008 and December 2011. That was a different approach from bank regulators, who required banks to hire independent consultants who are undertaking a more detailed review of each consumer’s case.
The biggest awards under the rules announced by the Federal Reserve and Office of the Comptroller of the Currency, would be $125,000 per consumer. Those awards would go to consumers who lost their home without defaulting on their mortgage. Banks also must pay that same fine if they violated a federal law preventing foreclosures on the military or foreclosed on a homeowner enrolled in a loan modification plan.
Smaller awards would go to consumers who had other kinds of violations. Consumers whose applications for loan modifications were improperly denied are in line for up to $15,000. Those who were never solicited for loan help as required under federal programs are eligible for up to $1,000.
Borrowers are likely to face a tough burden of proof for the larger awards, said David Dunn, a lawyer who represents banks at law firm Hogan Lovells,
Lawsuits, Legal & regulatory | admin June 24, 2012
