News / USA

    US Banks to Pay $8.5 Billion Settlement on Foreclosure Abuse

    VOA News
    Some of the largest U.S. banks have agreed to an $8.5 billion settlement to resolve claims that they abused financially troubled homeowners as they sought to foreclose on their home purchase loans at the height of the country's financial downturn.

    As millions of U.S. homeowners lost their jobs in 2009 and 2010, they often fell behind on their monthly loan payments, prompting their lenders to take ownership of their properties.  But as they moved to foreclose, banks often took shortcuts, automatically signing off on documents, even as they falsely claimed they had individually reviewed each homeowner's loan.

    Ten banks agreed to the settlement Monday with the country's central bank, the Federal Reserve, and U.S. financial regulators at the Office of the Comptroller of the Currency.  Among them are such well-known institutions as Bank of America, Citibank, JPMorgan Chase, PNC and Wells Fargo.  Regulators are still negotiating a settlement with four other financial institutions.

    The regulators have said they found "critical deficiencies and shortcomings" in the way the banks handled the foreclosures.

    For the first time, homeowners affected by the abuse will be compensated, with more than 3.8 million homeowners facing foreclosure in 2009 and 2010 getting payments ranging from hundreds of dollars up to $125,000.

    Bank analyst Bert Ely told VOA the affected homeowners fall into several groups of people, including those who still could keep their homes.

    “There’s some people, a number of people that were forced into foreclosure that perhaps should not have been. At least there should have been more of an effort made to try and modify their mortgage to make it more affordable for the homeowner," Ely said. "In some cases, the house has been resold and occupied by someone else, in which case there would be some type of financial compensation. In other circumstances, particularly if the bank still owns the house, then the homeowner might be able to get it back. But we also have a number of people, where the foreclosure has not yet taken place, and this settlement provides money to provide for reduction of mortgages to make them more affordable for the people that are still in their homes."

    Ely said the banks' foreclosure practices ultimately do not speak well of their ethics. He said U.S. lending practices at the time stemmed from pressure by Wall Street on banks to approve as many loans as possible, so mortgage securities could then be sold to investors.

    "I think, to some extent, they were, at least in some cases, meeting the supposed demand from Wall Street for mortgages to securitize," Ely said. "I think this is all part of the widespread belief at the time that homeownership was good for all, and that the homeownership rate in the United States should be increased.  And things went to excess, there’s no question about it. That’s on the origination side, or creation of mortgages. And then, of course, where a lot of problems arose was on mortgages that went bad, as many of them inevitably were, and then we got into the foreclosure mess. This settlement, and some other settlements, are dealing with the foreclosure problems that developed, where, again, a lot of shortcuts were taken.”

    Ely said that as a result of excessive home loan lending, banks have changed their practices.

    “Banks are much more careful today in terms of how they’re originating mortgages, dotting all the i’s, crossing all the t’s. Weaker borrowers are not able to get mortgages today and also foreclosure practices have been improved,” Ely said.

    You May Like

    Video Democrats Clinton, Kaine Offer 'Very Different Vision' Than Trump

    In a jab at Trump, Clinton says her team wants to 'build bridges, not walls'; Obama Hails Kaine's record; Trump calls Kaine a 'job-killer'

    Turkey Wants Pakistan to Close Down institutions, Businesses Linked to Gulen

    Thousands of Pakistani students are enrolled in Gulen's commercial network of around two dozen institutions operating in Pakistan for over two decades

    AU Passport A Work in Progress

    Who will get the passport and what the benefits are still need to be worked out

    This forum has been closed.
    Comment Sorting
    Comments
         
    by: Gaylan Olander from: Colorado
    January 30, 2013 2:05 PM
    Thank you for the information posted. How do I find out if I am qualified for any compensation?

    by: Vitia from: CrJTWvEHjXzFd
    January 17, 2013 4:36 AM
    I'm imprseesd by your writing. Are you a professional or just very knowledgeable?

    by: Daniel Durazo from: Richmond, VA
    January 07, 2013 1:09 PM
    It seems like a good compromise for all. I'm sure the homeowners are happy to receive even a small amount of compensation and the banks are very happy to put this all behind them.

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    In State of Emergency, Turkey’s Erdogan Focuses on Spiritual Movementi
    X
    July 22, 2016 11:49 AM
    The state of emergency that Turkish President Recep Tayyip Erdogan has declared is giving him even more power to expand a purge that has seen an estimated 60,000 people either arrested or suspended from their jobs. VOA Europe correspondent Luis Ramirez reports from Istanbul.
    Video

    Video In State of Emergency, Turkey’s Erdogan Focuses on Spiritual Movement

    The state of emergency that Turkish President Recep Tayyip Erdogan has declared is giving him even more power to expand a purge that has seen an estimated 60,000 people either arrested or suspended from their jobs. VOA Europe correspondent Luis Ramirez reports from Istanbul.
    Video

    Video Scientists in Poland Race to Save Honeybees

    Honeybees are in danger worldwide. Causes of what's known as colony collapse disorder range from pesticides and loss of habitat to infections. But scientists in Poland say they are on track to finding a cure for one of the diseases. VOA’s George Putic reports.
    Video

    Video Wall Already Runs Along Parts of US-Mexico Border

    The Republican Party’s presidential nominee, Donald Trump, gained the support of many voters by saying he would build a wall to keep undocumented immigrants and drugs from coming across the border from Mexico. Critics have called his idea impractical and offensive to Mexico, while supporters say such a bold approach is needed to control the border. VOA’s Greg Flakus has more from the border town of Nogales, Arizona.
    Video

    Video New HIV Tests Emphasize Rapid Results

    As the global fight against AIDS intensifies, activists have placed increasing importance on getting people to know their HIV status. Some companies are developing new HIV testing methods designed to be quick, easy and accurate. Thuso Khumalo looks at the latest methods, presented at the International AIDS conference in Durban, South Africa.
    Video

    Video African Youth with HIV Urge More Support

    HIV, the virus that causes AIDS, is the top killer of teens in sub-Saharan Africa. But many youths say their experience with the virus is unique and needs to be addressed differently than the adult epidemic. VOA South African Correspondent Anita Powell reports.
    Video

    Video Poor Residents in Cleveland Not Feeling High Hopes of Republican Convention

    With the Republican Party's National Convention underway in Cleveland, Ohio, delegates and visitors are gathered in the host city's downtown - waiting to hear from the party's presidential candidate, Donald Trump. But a few kilometers from the convention's venue, Cleveland's poorest residents are not convinced Trump or his policies will make a difference in their lives. VOA's Ramon Taylor spoke with some of these residents as well as some of the Republican delegates and filed this report.
    Video

    Video Pop-Up Art Comes to Your Living Room, Backyard and Elsewhere

    Around the world, independent artists and musicians wrestle with a common problem: where to exhibit or perform? Traditional spaces such as museums and galleries are reserved for bigger names, and renting a space is not feasible for many. Enter ArtsUp, which connects artists with venue owners. Whether it’s a living room, restaurant, office or even a boat, pop-up events are bringing music and art to unexpected places. Tina Trinh has more.
    Video

    Video With Yosemite as Backdrop, Obama Praises National Parks

    Last month, President Barack Obama and his family visited some of the most beautiful national parks in the U.S. Using the majestic backdrop of a towering waterfall in California's Yosemite National Park, Obama praised the national park system which celebrates its 100th anniversary this year. He talked about the importance of America’s “national treasures” and the need to protect them from climate change and other threats. VOA’s Julie Taboh reports.
    Video

    Video Counter-Islamic State Coalition Plots Next Steps

    As momentum shifts against Islamic State in Iraq, discussions are taking place about the next steps for driving the terrorist group from its final strongholds. Secretary of State John Kerry is hosting a counter-IS meeting at the State Department, a day after defense ministers from more than 30 countries reviewed and agreed upon a course of action. VOA Pentagon correspondent Carla Babb reports.
    Video

    Video Russia's Participation at Brazil Olympic Games Still In Question

    The International Olympic Committee has delayed a decision on whether to ban all Russian teams from competing in next month's Olympic Games in Brazil over allegations of an elaborate doping scheme. The World Anti-Doping Agency recently released an independent report alleging widespread doping by Russian athletes at the 2014 Winter Olympics in Sochi. So far, only Russian track and field athletes have been barred from the Summer Games in Brazil. VOA's Zlatica Hoke has more.
    Video

    Video Scotland’s Booming Whisky Industry Fears Brexit Hangover

    After Britain’s vote to leave the European Union, Scotland’s government wants to break away from the United Kingdom – fearing the nation’s exports are at risk. Among the biggest of these is whisky. Henry Ridgwell reports on a time of turmoil for those involved in the ancient art of distilling Scotland’s most famous product.
    Video

    Video Millennials Could Determine Who Wins Race to White House

    With only four months to go until Americans elect a new president, one group of voters is getting a lot more attention these days: those ages 18 to 35, a generation known as millennials. It’s a demographic that some analysts say could have the power to decide the 2016 election. But a lot depends on whether they actually turn out to vote. VOA’s Alexa Lamanna reports.

    Special Report

    Adrift The Invisible African Diaspora