Late last week, the
New York Times
reported that after the $25 billion foreclosure-settlement deal
in 2012, another deal is expected to be announced very soon. The
deal is anticipated to address the issues not dealt in the 2012
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The $10 billion settlement deal is anticipated to be announced
this week by the Office of the Comptroller of the Currency (OCC)
along with other banking regulators. Fourteen banks, including
JPMorgan Chase & Co.
Bank of America Corporation
Wells Fargo & Company
), are going to be part of the deal.
The deal is expected to end the efforts of the U.S. government to
hold the mortgage servicers responsible for faulty foreclosure
practices. Moreover, the process initiated by the OCC in 2011 -
to review all the borrowers' files that were wrongly foreclosed
in 2009-2010 - would also come to an end.
Under that proposal, the banks were required to hire independent
consultants to go through the loan files and look for any faulty
foreclosure practice. However, this is turning out to be a costly
affair for the banks - having already spent nearly $1.3 billion
on the consultants hired. Therefore, they have opted for a
one-time settlement deal.
Under the deal, a significant amount - nearly $3.75 billion -
will be utilized to compensate homeowners whose properties were
wrongfully foreclosed. The remaining amount will be used for
providing relief to troubled homeowners through principal
reductions and loan modifications.
At present, regulators and the banks are negotiating to determine
the individual payouts to the aggrieved homeowners. Further, the
regulators would give credit to the banks for compensation that
they have already paid to the borrowers.
The deal, if finalized, will be a relief for the banks as well as
homeowners. We are hopeful that like the earlier one, this deal
would also be a decisive step in restoring confidence in
businesses and rejuvenating the sagging housing market.