Since the real estate implosion five years ago, major banks have been accused of fraudulent tactics to foreclose on thousands of Americans.
On Monday, the U.S. government reached a settlement with 10 banks who will pay $8.5 billion. About four million homeowners who lost their homes to foreclosure will be getting some compensation.
About 200 people showed up to a workshop in south Los Angeles last month trying to figure out if their banks improperly foreclosed on their homes. Now many of them will be getting a check.
The 10 banks — including Citi, JPMorgan Chase, Bank of America, and Wells Fargo — will make $3.3 billion in direct payments to customers who were in foreclosure during 2009 and 2010.
Homeowners charged improper fees could be paid a couple hundred dollars. About $125,000 would go to homeowners who were foreclosed on even though they were up to date in their mortgage payments.
The settlement replaces an existing independent foreclosure review program that began in 2011 after it was discovered many banks approved foreclosure without actually reviewing the cases, sometimes hundreds a day.
Tunua Thrash / CBS News
Tunua Thrash helps homeowners in Los Angeles navigate foreclosure. She worries the bank payouts won’t go far enough.
“Certainly the fact that there have been many mistakes, and some homeowners have lost equity that could exceed that amount, is letting the banks off easy…as far making sure that homeowners are made whole,” Thrash said.
The banks will also spend $5.2 billion on loan modifications and principal reductions for current homeowners. That may help James Bruce, who could lose his south L.A. home at the end of the month unless Citibank modifies his adjustable rate mortgage, which he can no longer afford.
“It started adjusting on me and it just got overbearing and I couldn’t take it, so it just ate up all my savings and everything that I could muster up to pay that mortgage for over a year,” Bruce said.
About 3.8 million people will be getting some payment from these 10 banks. Even homeowners whose foreclosures were processed properly will get something because the banks have decided it’s simply easier to write a check than try to figure out who was actually harmed.
Source: CBS NEWS