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

Tired of Waiting, South Africans Demand Change ‘Now’

With chronic poverty and lack of basic services largely fueling recent xenophobic attacks, many in Rainbow Nation say it’s time for government to act More

Challenges Ahead for China's Development Plans in Pakistan

Planned $46 billion in energy and infrastructure investments in Pakistan are aimed at transforming the country into a regional hub for trade and investment More

Audio 'Forbidden City' Revisits Little Known Era of Asian-American Entertainment

Little-known chapter of entertainment history captured in 80s documentary is revisited in new digitally remastered format and book More

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.
Study: Insecticide Damaging Wild Bee Populationsi
X
April 24, 2015 10:13 PM
A popular but controversial type of insecticide is damaging important wild bee populations, according to a new study. VOA’s Steve Baragona has more.
Video

Video Study: Insecticide Damaging Wild Bee Populations

A popular but controversial type of insecticide is damaging important wild bee populations, according to a new study. VOA’s Steve Baragona has more.
Video

Video Data Servers Could Heat Private Homes

As every computer owner knows, when their machines run a complex program they get pretty hot. In fact, cooling the processors can be expensive, especially when you're dealing with huge banks of computer servers. But what if that energy could heat private homes? VOA’s George Putic reports that a Dutch energy firm aims to do just that.
Video

Video Cinema That Crosses Borders Showcased at Tribeca Film Festival

Among the nearly 100 feature length films being shown at this year’s Tribeca Film Festival in New York City are more than 20 documentaries and features with international appeal, from a film about a Congolese businessman in China, to documentaries shot in Pakistan and diaspora communities in the U.S., to a poetic look at disaffected South African youth. VOA’s Carolyn Weaver has more.
Video

Video UN Confronts Threat of Young Radicals

The radicalization and recruitment of young people into Islamist extremist groups has become a growing challenge for governments worldwide. On Thursday, the U.N. Security Council heard from experts on the issue, which has become a potent threat to international peace and security. VOA’s Margaret Besheer reports.
Video

Video Growing Numbers of Turks Discover Armenian Ancestry

In a climate of improved tolerance, growing numbers of people in Turkey are discovering their grandmothers were Armenian. Hundreds of thousands of Armenians escaped the mass deportations and slaughter of the early 1900's by forced conversion to Islam. Or, Armenian children were taken in by Turkish families and assimilated. Now their stories are increasingly being heard. Dorian Jones reports from Istanbul that the revelations are viewed as an important step.
Video

Video Migrants Trek Through Western Balkans to Reach EU

Migrants from Africa and other places are finding different routes into the European Union in search of a better life. The Associated Press followed one clandestine group to document their trek through the western Balkans to Hungary. Zlatica Hoke reports that the migrants started using that route about four years ago. Since then, it has become the second-most popular path into Western Europe, after the option of sailing from North Africa to Italy.
Video

Video TIME Magazine Honors Activists, Pioneers Seen as Influential

TIME Magazine has released its list of celebrities, leaders and activists, whom it deems the world’s “most influential” in 2015. VOA's Ramon Taylor reports from New York.
Video

Video US Businesses See Cuba as New Frontier

The Obama administration's opening toward Cuba is giving U.S. companies hope they'll be able to do business in Cuba despite the continuation of the U.S. economic embargo against the communist nation. Some American companies have been able to export some products to Cuba, but the recent lifting of Cuba's terrorism designation could relax other restrictions. As VOA's Daniela Schrier reports, corporate heavy hitters are lining up to head across the Florida Straits - though experts urge caution.
Video

Video Kenya Launches Police Recruitment Drive After Terror Attacks

Kenya launched a major police recruitment drive this week as part of a large-scale effort to boost security following a recent spate of terror attacks. VOA’s Gabe Joselow reports that allegations of corruption in the process are raising old concerns about the integrity of Kenya’s security forces.
Video

Video Japan, China in Race for Asia High-Speed Rail Projects

A lucrative competition is underway in Asia for billions of dollars in high-speed rail projects. Cambodia, India, Indonesia, Malaysia Thailand and Vietnam are among the countries planning to move onto the fast track. They are negotiating with Japan and the upstart Chinese who are locked in a duel to revolutionize transportation across Asia. VOA Correspondent Steve Herman in Bangkok has details.
Video

Video Scientists: Mosquitoes Attracted By Our Genes

Some people always seem to get bitten by mosquitoes more than others. Now, scientists have proved that is really the case - and they say it’s all because of genes. It’s hoped the research might lead to new preventative treatments for diseases like malaria, as Henry Ridgwell reports from London.
Video

Video Bible Museum Coming to Washington DC

Washington is the center of American political power and also home to some of the nation’s most visited museums. A new one that will showcase the Bible has skeptics questioning the motives of its conservative Christian funders. VOA religion correspondent Jerome Socolovsky reports.
Video

Video Armenia and Politics of Word 'Genocide'

A century ago this April, hundreds of thousands of Armenians of the Turkish Ottoman empire were deported and massacred, and their culture erased from their traditional lands. While broadly accepted by the U.N. and at least 20 countries as “genocide”, the United States and Turkey have resisted using that word to describe the atrocities that stretched from 1915 to 1923. But Armenians have never forgotten.
Video

Video Afghan First Lady Pledges No Roll Back on Women's Rights

Afghan First Lady Rula Ghani, named one of Time's 100 Most Influential, says women should take part in talks with Taliban. VOA's Rokhsar Azamee has more from Kabul.
Video

Video New Brain Mapping Techniques Could Ease Chronic Pain

From Boulder, Colorado, Shelley Schlender reports that new methods for mapping pain in the brain are providing validation for chronic pain and might someday guide better treatment.

VOA Blogs