"A foreclosure settlement between the government and 13 banks will spread $3.6 billion in cash among millions of borrowers starting in April, regulators said Thursday.
But the $5.7 billion in mortgage
relief that's also part of the deal may favor borrowers with the biggest
unpaid loan balances, consumer advocates say.
The settlement, first announced in January, is intended to compensate borrowers for foreclosure and mortgage servicing abuses.
cash will be split among 4.2 million borrowers who were in foreclosure
in 2009 or 2010 and had home loans serviced by one of 13 banks. They
include Bank of America, Wells Fargo and JPMorgan Chase.
payouts will range from a few hundred dollars up to $125,000, says the
Office of the Comptroller of the Currency (OCC). It's overseeing the
settlement with the Federal Reserve Board.
The companies are
expected to meet their $5.7 billion mortgage relief obligation, in part,
by modifying loans. They'll earn certain levels of credit toward that
$5.7 billion for certain actions.
Consumer advocates said they were shocked and dismayed when they learned Thursday how some of the credits will be tallied.
For instance, a bank forgiving $15,000 in principal owed on a $100,000 unpaid balance would get a $100,000 credit.
the bank forgave $15,000 in principal on a $500,000 unpaid balance,
they would get a $500,000 credit, says Bryan Hubbard, OCC spokesman."
Of course it favors the banks!