Banks Agree to Pay $8.5 Billion for Foreclosure Missteps

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The Office of the Comptroller of the Currency and the Federal Reserve announced this morning that the agencies have reached an agreement with 10 banks to settle enforcement actions related to “deficient practices in mortgage loan servicing and foreclosure processing.” The banks will provide $3.3 billion in direct payments to eligible borrowers and another $5.2 billion to pay for assistance with other issues, such as loan modifications.

Up to 3.8 million people were in foreclosure proceedings in 2009 and 2010, and as many as 400,000 may be eligible for direct payments. According to the agencies, borrowers could receive compensation payments of a few hundred dollars up to $125,000.

The 10 banks involved in the settlement are Aurora, Bank of America Corp. (NYSE: BAC), Citigroup Inc. (NYSE: C), JPMorgan Chase & Co. (NYSE: JPM) MetLife (NYSE: MET), PNC Financial Services Group Inc. (NYSE: PNC), Sovereign, SunTrust Banks Inc. (NYSE: STI), U.S. Bancorp (NYSE: USB), and Wells Fargo & Co. (NYSE: WFC).

The agencies said they are continuing to seek agreements with other loan servicers which were not parties to the agreement announced today. Today’s settlement was reached in addition to a $26 billion settlement announced with some of the same lenders last February.

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