Big Banks Agree to Pay $19 Billion in Two Foreclosure Settlements

January 8, 2013

In the first settlement,  ten big banks have agreed to pay $8.5 billion to settle federal complaints that they wrongfully foreclosed on hundreds of thousands of homeowners.  While that sounds like a lot of money, many critics say it falls woefully short for all the pain and harm caused to families who should have been allowed to stay in their homes.

“The money is grossly inadequate for homeowners, and the program will require careful oversight to ensure that all homeowners harmed get a fair chance at benefits,” said Ed Mierzwinski, the consumer program director for U.S. PIRG, a nonprofit consumer advocacy group.

The agreement includes Aurora, Bank of America, Citibank, JPMorgan Chase, MetLife Bank, PNC, Sovereign, SunTrust, U.S. Bank, and Wells Fargo. As part of the deal,  more than 3.8 million borrowers whose homes were in foreclosure in 2009 and 2010 with the banks will receive cash compensation, the government said in a statement.  The average compensation for each homeowner who faced foreclosure in 2009 and 2010 will run about $2,000.

In the second settlement, Bank of America agreed to pay almost $10.4 billion to Fannie Mae. The BofA settlement ends a bitter standoff between the bank, once the largest seller of home loans, and Fannie Mae, the nation’s largest mortgage buyer.  Fannie had demanded that BofA buy back a mountain of defaulted loans issued by Countrywide, which BofA acquired in 2008.

Click here to read more about the settlements in the LA Times.