Foreclosed to get $8.5B from settlement
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Long Island homeowners who faced foreclosure in 2009 and 2010 could be eligible for cash payments under an $8.5 billion national settlement announced Monday.
The payments, ranging from a few hundred dollars to $125,000, are part of an agreement between 10 banks and federal regulators, resolving allegations of mortgage foreclosure abuses.However, local attorneys and housing advocates were divided about how many Long Island homeowners would benefit from the accord.
The 3.8 million borrowers nationwide who qualify can expect to receive $3.3 billion in payments, regardless of whether errors were made in their cases, according to a spokesman for the Office of the Comptroller of the Currency, which along with the Federal Reserve reached the settlement with the banks.
The lowest payments will go to borrowers whose loans were subject to problems such as improper fees, the spokesman said. Homeowners who could have been improperly denied a loan modification will receive larger amounts, and the biggest payouts will go to groups such as military service members foreclosed upon while on active duty and people whose homes went into foreclosure even though they were current on their payments, the spokesman said. Banks face strict requirements by law when they foreclose on the homes of active-duty service members.
"Loans are slotted into broad categories, and they're getting paid regardless of whether or not there was an error," said the spokesman, Bryan Hubbard.
The agreement's other $5.2 billion is to aid homeowners, including loan modifications, debt forgiveness and short sales, said comptroller spokesman Bryan Hubbard.
The lenders who settled were Bank of America, Wells Fargo, Citigroup and JPMorgan Chase, as well as Aurora, MetLife Bank, PNC, Sovereign, SunTrust and U.S. Bank. All eligible borrowers will be contacted by the end of March. They do not need to take any action, but those with questions should contact their loan servicers, Hubbard said.
The settlement replaces the case-by-case review of individual foreclosures that regulators required starting in April 2011, in the wake of a scandal over improper foreclosures. Regulators and banks alike said the accord would proceed faster than the case-by-case review, which has been criticized as time-consuming and expensive. No payments have been made under the case-by-case review.
Borrowers will receive payments "significantly more quickly" under the accord than they would have under the case-by-case review, the Office of the Comptroller of the Currency said in a statement.
The agreement "will bring resolution to more customers in an expedited manner," a Wells Fargo spokesman said in a statement.
The settlement is "a tremendous boon" to Long Island borrowers, said Craig Robins, a bankruptcy and foreclosure defense attorney in Woodbury. "It gives them a lot more flexibility to work out a resolution with the bank," he said.
Robins said he sees "grossly improper" practices in about half of his clients' foreclosure cases, ranging from missing documents to errors.
However, many distressed homeowners may have trouble finding out about the settlement, either because English is not their first language or because they cannot afford attorneys who keep them informed, said Gale Berg, who runs the foreclosure clinics at the Nassau County Bar Association."A lot of them lost their homes because of improper procedures" by lenders, Berg said, but "they didn't have the wherewithal to fight it."