10 Big banks announce a settlement of $8.5 billion to homeowners

10 major banks including JPMorgan Chase, Bank of America and Wells Fargo, will pay billions to homeowners to end a review process of foreclosure files that was required under a 2011 enforcement action. The settlement comes after a review on Banks’ handling of foreclosure documents showed that banks did not properly followed foreclosure procedures which resulted in a lot home being foreclosed and or homeowners having to pay high fees to the banks.

The banks settled to pay $8.5 billion to homeowners. Consumer advocates argue that banks got an easy bargain; since by paying $ 8.5 billion, they are avoiding paying a substantial amount of money to homeowners who were subject to the banks negligence and mishandling of the foreclosure documents and steps.

 The banks will pay about $3.3 billion to homeowners to end the review of foreclosures. The remaining $5.2 billion will be used to reduce mortgage bills and erase principal on home sales that generated less than borrowers owed on their mortgages.

Homeowners, who were denied a loan modification as a result of the malpractice, could receive small payments, while homeowners who lost their homes unfairly and then sold by the banks would be eligible for the biggest payments.

The deal "represents a significant change in direction" that ensures "consumers are the ones who will benefit, and that they will benefit more quickly and in a more direct manner," Thomas Curry, the comptroller of the currency, said in a statement. Diane Thompson, a lawyer with the National Consumer Law Center, complained that the deal won't actually compensate homeowners for the actual harm they suffered. The deal "caps (banks') liability at a total number that's less than they thought they were going to pay going in," she said

The company subject to the action include: Citigroup, MetLife Bank, PNC Financial Services, Sovereign, SunTrust, U.S. Bank ,Aurora, GMAC Mortgage, HSBC Finance Corp., EMC Mortgage Corp, including JPMorgan Chase, Bank of America and Wells Fargo.

 The settlement is separate from a $25 billion settlement between 49 state attorneys general, federal regulators and five banks: Ally, formerly known as GMAC; Bank of America; Citigroup; JPMorgan Chase and Wells Fargo

Let’s note that the settlement comes on the same day that Bank of America agreed to pay $11.6 billion to government-backed mortgage financier Fannie Mae to settle claims related to mortgages that went bad during the housing crisis, mostly loans issued by Countrywide Financial, now a BofA subsidiary