Homeowners set to get compensation for bad foreclosure practices

By Vicki Needham - 02/28/13 06:15 PM ET

Mortgage lenders will begin compensating homeowners in April for shoddy foreclosure practices.

The Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board announced the process on Thursday that will provide those harmed by wrongful practices between a few hundred dollars up to $125,000 as part of a $9.3 billion settlement announced in January.

The settlement, announced Jan. 7, includes 13 banks and ends an independent foreclosure review process hat was designed to examine millions of files from homes that were in foreclosure in 2009 and 2010.

Several Democratic lawmakers — Sen. Elizabeth Warren (Mass.) and Reps. Maxine Waters (Calif.) and Elijah Cummings (Md.) — have launched a probe into why the detailed review process was terminated and if the multibillion-dollar settlement with the banks will be adequate enough to compensate the 4.2 million homeowners covered by the agreement.

Earlier this month, Waters, who is the ranking member of the House Financial Services Committee, pressed the OCC for more information about the amounts homeowners would receive.

“Without this information, the public will have no means by which to determine whether relief was provided in a manner that appropriately reflects the overall impact of foreclosures on certain communities and demographic groups,” she said.

The amount includes $3.6 billion in cash payments and $5.7 billion in other assistance to borrowers such as loan modifications and forgiveness of deficiency judgments.

The banks are: Aurora, Bank of America, Citibank, Goldman Sachs, HSBC, JPMorgan Chase, MetLife Bank, Morgan Stanley, PNC, Sovereign, SunTrust, U.S. Bank and Wells Fargo.

Borrowers are not required to take any additional steps to receive the payments.

Three other mortgage lenders, GMAC Mortgage, Everbank and OneWest, didn’t sign onto the deal and will remain under the review process.

Regulators expect the reviews for these servicers to be completed over the course of the coming year.

They service 457,000 mortgages that were in some stage of foreclosure in 2009 or 2010.