Banks Reach $8.5 Billion Settlement on Mortgage Abuse

Ten of the biggest U.S. mortgage companies agreed yesterday to an $8.5 billion settlement with federal regulators. The settlement will end a case-by-case review program to identify Americans whose homes were improperly seized in the wave of foreclosure filings that occurred nationwide after the 2007 housing collapse. 

Critics, including one member of the Congressional Black Caucus, say the deal risks leaving too many behind. "I have serious concerns that this settlement may allow banks to skirt what they owe and sweep past abuses under the rug without determining the full harm borrowers have suffered," said Rep. Elijah E. Cummings (D-Md.), a member of the House Committee on Oversight and Government Reform. NBC News reports: 

[Office of the Comptroller of the Currency] officials said Monday the consumers will be better served under the settlement because claims will now be paid more quickly and that the cost of the review process was diverting funds that could have been used to pay claims. More than $1.5 billion has already spent on case-by-case reviews, officials said. 

"When we began the Independent Foreclosure Review, the OCC pledged to fix what was broken, identify who was harmed, and compensate them for that injury," Comptroller of the Currency Thomas Curry said in a statement. "While today's announcement represents a significant change in direction, it meets those original objectives by ensuring that consumers are the ones who will benefit, and that they will benefit more quickly and in a more direct manner."

Under the agreement, banking giants JPMorgan Chase, Bank of America, Citigroup, Wells Fargo and six other mortgage lenders will provide $5.2 billion in mortgage assistance and $3.3 billion in direct payments to wronged borrowers, according the Office of the Comptroller of the Currency and the Federal Reserve. 

The other seven lenders include Aurora, MetLife Bank, PNC, Sovereign, SunTrust, and U.S. Bank.

The banks were among 12 lenders and two mortgage servicing companies cited by regulators in 2011 for widespread foreclosure abuses following claims that they had improperly seized homes in the wave of foreclosure filings that swamped the industry after the 2007 housing collapse. 

Read more at NBC News.