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3 On Your Side: Banks Agree To Pay $8.5 For Foreclosure Abuse

jim-donovan-web Jim Donovan
Jim Donovan is a 13-time Emmy Award-winning consumer reporter w...
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By Jim Donovan

PHILADELPHIA (CBS) – If you lost your home in the mortgage meltdown, you may have some money coming your way. 3 On Your Side Consumer Reporter Jim Donovan tells us about the big settlements reached today between some national banks and the federal government.

Ten big banks and mortgage companies have agreed to pay $8.5 billion to settle federal complaints that they wrongfully foreclosed on homeowners who should have been allowed to stay in their homes. The banks include: Bank of America, Citibank, JP Morgan Chase, Metlife Bank, PNC, Sovereign, Suntrust, U.S. Bank, and Wells Fargo.

The government claimed the banks mishandled paperwork and skipped required steps in the foreclosure process. This is often referred to as robo-signing. The agreement covers up to 3.8 million people who were in foreclosure in 2009 and 2010. It’s estimated that under this new settlement, around 400,000 of these people who were wrongfully foreclosed on could receive payments ranging from $1,000 up to $125,000. Others would be eligible for loan modifications.

Meanwhile, Bank of America has also reached a settlement with Fannie Mae. The bank will pay out $3.6 billion to Fannie Mae as well as buy back over $6 billion in loans that its Countrywide unit had sold to the government before the housing meltdown. Countrywide was a giant in mortgage lending, but it was also known for approving risky loans.

Borrowers who are eligible for settlement payouts are expected to be contacted by the end of march with payment details. It’s likely a graduated scale will be used to determine those payouts. For example, if a bank failed to offer someone a loan modification that they were eligible for, that would be considered a lighter offense, while unfairly seizing and selling a person’s home would entitle that person to a bigger payment.

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