There are around a million homeowners facing foreclosure and stuck in limbo, especially after a settlement was announced on Monday between the government and lenders. In a story at Economy Watch, one borrower’s story of four years fighting to keep her home highlighted the article. She found that she was not eligible for any of the various programs to help her keep her home. She had just filled out a form to see if she could benefit from a federal program set up after widespread mortgage abuses came to light in 2010. However, that program was canceled when this new settlement was reached.
The $8.5 billion settlement was between federal regulators and 10 banks. Separately, Bank of America agreed to pay more than $10 billion to Fannie Mae to settle claims over mortgages, most of them through Countrywide Financial, now a BofA subsidiary. Those million homeowners are now stuck in the same limbo as our example homeowner.
Critics of the settlement say that it will allow banks to skirt their responsibility for issuing mortgages they shouldn’t have and for foreclosure abuses. The settlement brings to an end the two year government case-by-case review of suspected mortgages. Under the agreement, JPMorgan Chase, Bank of America, Citigroup, Wells Fargo and six other lenders will provide $5.2 billion in mortgage assistance and $3.3 billion in direct payments to wronged borrowers.
The government disagrees with critics, as it is stated that borrowers will be better served after this settlement because they’ll get their claims paid more quickly. These same officials maintain that the amount set aside is adequate to compensate homeowners who suffered a financial loss from bank mistakes. Critics disagree, stating that the the review program wasn’t thorough enough to assess accurately whether a home had been wrongly seized. They contend that reviewers only used the loan servicers’ files to determine a cause for relief, not checking with other resources or counselors the borrowers consulted.
Under the new agreement, determinations of eligibility for relief will now be made by the 10 lenders (fox in henhouse perhaps?). A payment agent will contact borrowers who are determined to be eligible with details of payments by the end of March. Homeowners will receive payments of between a few hundred dollars and as much as $125,000, depending on the type of error made by the mortgage company servicing their loan.