by Brian Wolfman
Last month, we posted about a likely settlement between federal regulators and 13 major mortgage servicers -- including some of the world's biggerst banks -- that would make direct cash distributions to homeowners who lost their homes or went underwater during the financial crisis, in whole or in part because of improper foreclosure and loan practices. At the time, some consumer advocates thought the deal -- then $8.5 billion -- was not big enough. For instance, Alys Cohen of the National Consumer Law Center called the cash payments for consumers "wholly inadequate in light of the scale of the harm."
The deal -- now worth $9.3 billion -- was finalized yesterday, as explained in this article by Danielle Douglas. Douglas says that $3.6 billion will go directly to borrowers whose homes were wrongfully foreclosed in 2009 and 2010. The remaining $5.7 billion will be used to reduce mortgage payments or interest rates on existing loans. The amount and kind of relief that consumers will obtain under the settlment will depend on which of 11 types of harm a consumer suffered. Consumer advocates are concerned that, under the settlement, borrowers will have no input in deciding how their situations are categorized and no right of appeal. Douglas explains that homeowners should start recieving payments or loan reductions in the next month or so.
Go here to see each mortgage servicer's share of the settlement. (Bank of America tops the list at nearly $2.9 billion.)