WASHINGTON, (Reuters) – A group of 10 mortgage servicers agreed today to pay a total of $8.5 billion to end a government-mandated case-by-case review of foreclosures in an acknowledgement the reviews had proven too cumbersome and expensive.
Bank of America Corp, Citigroup Inc, JPMorgan Case & Co, Wells Fargo & Co and six others will pay $3.3 billion directly to eligible borrowers, and will pay $5.2 billion in loan modifications and forgiveness, regulators said.
The U.S. Office of the Comptroller of the Currency and the Federal Reserve Board said they accepted the agreement to get relief to consumers more quickly than through the reviews.
In April 2011, the government required the servicers to review foreclosure actions from 2009 and 2010 to determine whether borrowers had been unlawfully foreclosed on or suffered some other financial harm due to errors in the foreclosure process.
Comptroller of the Currency Thomas Curry said in a statement: “It has become clear that carrying the process through to its conclusion would divert money away from the impacted homeowners and also needlessly delay the dispensation of compensation to affected borrowers.”
Roughly 3.8 million borrowers who were foreclosed on within the time frame of the review will receive cash compensation, the agency said.
Borrowers could receive from hundreds of dollars up to $125,000, depending on the type of errors they experienced.
Regulators said the agreement replaces the case-by-case reviews with a “broader framework,” but did not provide details.
The other banks involved in the settlement are: Aurora , MetLife Bank, PNC, Sovereign , SunTrust, and U.S. Bank.