Money Matters - Simplified

Mortgage servicers reach compromise decree on foreclosure fiasco

The 14 largest mortgagers of the U.S. have reached a settlement to compensate house owners who incurred losses due to faulty foreclosures.

The officials from the Department of Housing and Urban Development, Justice Department and 10 state attorneys general met with representatives of 14 largest mortgagers of the U.S. and reached a settlement to compensate house owners who incurred losses due to faulty foreclosures.

This is the first set of sanctions against these institutions.

Regulators trying for a global settlement
The present settlement can help the Justice Department in ascertaining the magnitude of fines to be imposed on these institutions, Tom Perrellli, associate attorney general, involved in the negotiations, expressed hope.

“This has been a very broad interagency effort. The best possible resolution for consumers, for all government entities, is a fully coordinated resolution,” said Perrelli.

The banks which included Wells Fargo & Co. and JPMorgan Chase & Co, have agreed to conduct a re-evaluation of all loans that went into foreclosure in the years, 2009 and 2010.

These institutions also agreed to improve procedures for foreclosure and refinancing procedures and agreed to hire extra staff and upgrade the document tracking systems.

The servicers also agreed to end the dual track foreclosure procedure in which they seized the homes of delinquent borrowers even as the negotiations for the lower mortgage payments.

More penalties to come
Thomas J. Miller, Iowa attorney general said that today’s settlement does not limit his pursuit of further penalties on these institutions. He is leading the talks on behalf of the attorney generals.

Miller said in a statement that this settlement “will not limit our pursuit of remedies and reforms. We will continue our efforts to ensure that the nation’s servicing and foreclosure system is fair to homeowners, banks and investors.”

The regulators also said that the settlement does not prevent them from issuing fines on these institutions later.

John Walsh, acting Comptroller of Currency, told the reporters in a press conference, “There will be civil money penalties. The issue is time and money.”

The Federal Reserve also said in a statement that it is planning to impose fines which according to it were “appropriate.”

Chief Executive Officer of JPMorgan, Jamie Dimon, announced during a conference call that the bank has already hired 3000 more employees and taken a charge of $1.1 billion to fulfil the terms of the consent decree.

The agreement has drawn criticism from those who expressed fear that it could weaken the broader negotiations.

Rep Maxine Waters, a member of Financial Services Committee said in a statement, “I fear that these consent orders are merely an attempt to do an end-run around our state attorneys general.”