The federal government’s $8.5 billion settlement with 10 large banks over foreclosure abuses following the collapse of the housing market in 2008 has been portrayed by many as swift justice for aggrieved homeowners. But some regulators and consultants see the deal as a distraction from a much-needed comprehensive review of banks’ foreclosure practices, the New York Times reported.
Regulators, led by the Office of the Comptroller of the Currency, abandoned their efforts to review some four million loans, after examining only a fraction of the foreclosures, according to former and current regulators and consultants angered over the agencies failure.
Without a thorough review of the loans, regulators have no idea how many borrowers were actually harmed and are therefore spreading the cash payments over all 3.8 million borrowers without regard to whether they were harmed or not. The upshot being that real victims of foreclosure abuses, such bungled loan modifications, deficient paperwork, excessive fees and wrongful evictions will get less money then they deserve.
“It’s absurd that this money will be distributed with such little regard to who was actually harmed,” Bruce Marks, CEO of the nonprofit Neighborhood Assistance Corporation of America, told the Times.
However the Office of the Comptroller argued that, while the review was flawed, the “settlement results in $3.3 billion being paid to consumers and that is the largest total cash payout of any settlement involving borrowers affected by foreclosures to date.” [NYT] —Christopher Cameron