Reports: Regulators Working Toward $10B Settlement Against 14 Banks

Reports: Regulators Working Toward $10B Settlement Against 14 Banks

01/02/2013 BY: ESTHER CHO

The New York Times reported a $10 billion settlement is in the works between federal regulators and 14 banks.

In April 2011, the Office of the Comptroller of the Currency (OCC), Federal Reserve, and the Office of Thrift Supervision (OTS) announced enforcement actions against the 14 banks after investigations led to allegations of abusive foreclosure practices.

As part of the consent orders, servicers were required to hire third-party consultants to conduct independent foreclosure reviews for cases where financial injury was believed to have occurred due to faulty foreclosure practices. The review was for foreclosure actions between January 1, 2009 and December 31, 2010.

After receiving extensions, the deadline to request an independent foreclosure review was finally closed December 31, 2012. If borrowers were found to have suffered financial harm after a review, regulators announced a lump-sum compensation plan that included payments ranging from $500 to $125,000.

However, Bloomberg reported the “penalties would supplant a system allowing borrowers who lost homes in 2009 and 2010 to seek compensation after foreclosure reviews.”

A new compensation plan has not been revealed.

Bloomberg also reported 495,000 borrowers have requested an independent foreclosure review as of the December 31 deadline.

In November and December 2011, the OCC attempted to reach 4.3 million borrowers

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