Foreclosure Settlement Program Pays $3.1B to Borrowers

by San Antonio Attorney

About 83% of borrowers have been paid from the foreclosure settlement program, which serves as the banks’ punishment for the financial injury they caused.

The 13 banks that compensated borrowers whose homes may have been unfairly foreclosed, have given approximately $3.1 billion to their former customers as of April, according to the Fed. That settlement deal resulted in faster payments to borrowers and banks paying a lot more than they would have, the Fed said.

Public advocacy groups and lawmakers did not agree with the regulators’ decision to scrap an independent review in 2012 in favor of a settlement, for the reason that it may have let some banks with excessive error rates in their reviews of foreclosure get away without paying homeowners the appropriate compensation.

The independent review of the foreclosure records was ordered by bank regulators in April 2011 to find out how many homeowners should be paid for foreclosure errors. But a year ago, it was stopped due to concerns it was taking too much time and not unveiling sufficient errors. Instead of continuing the review, the banks agreed to pay $9.3 billion, which includes $5.7 billion in assistance not in the form of cash and $3.6 billion in cash payments.

On Monday, the Fed said it identified a total error rate of around 4.6% on foreclosure reviews of independent consultants before the process was stopped in favor of the settlement. GMAC Mortgage had an 11.4% error rate and SunTrust Banks Inc. had 3.3% error rate.

Goldman Sachs Group, Inc. and Morgan Stanley reported zero error rates, but they also had hardly commenced their review when the settlement was made, the Fed said.

The error rates of the other banks have been disclosed earlier.

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