The United States Comptroller of the Currency and the Federal Reserve announced on Monday, January 7, 2013, that many of the Nation’s largest banks have agreed to pay $8.5 billion in damages to millions of foreclosure victims who were affected by wrongful foreclosure practices. The agreement ensures that more than 3.8 million borrowers whose homes were in foreclosure in 2009 and 2010 with the banks involved will receive cash compensation for damages in a timely manner. The Banks included in this settlement include large banks such as: Aurora, Bank of America, Citibank, JPMorgan Chase, MetLife Bank, PNC, Sovereign, SunTrust, US Bank, and Wells Fargo. According to a press release, the $8.5 billion sum includes $3.3 in direct payments to eligible borrowers, and $5.2 billion in other assistance to borrowers such as loan modification and forgiveness of deficiency judgments.
The victims of the wrongful foreclosure practices do not have to prove damages under this settlement; they will not be required to execute a waiver of any legal claims they may have against their servicer as a condition for receiving payment. The amount of the compensation will, however, vary; eligible borrowers are expected to receive anywhere from hundreds of dollars upwards to $125,000. The full amount received by borrowers will depend on the type of possible service error. As for borrowers receiving the settlement amount, a payment agent will be appointed to administer payments to borrowers on behalf of the bank involved. Eligible borrowers should expect to be contacted by the agent by the end of March 2013 with payment details. Some critics of this settlement agreement think that this deal is letting some banks off easier than they should be. However, with this settlement, the banks involved hope to put the entire mortgage mess behind them.
Some people may be wondering how this could effect their bankruptcy case. If you filed for bankruptcy and could potentially be receiving money from this settlement, your bankruptcy case could be effected by this. Because this is a large, lump sum of money that you are going to receive, your bankruptcy trustee could either hold your case open, or re-open your case, to wait until you receive the settlement check. Your trustee could then take an interest in a portion of the check to disburse to your creditors. If you know you are going to be receiving a settlement check, or have the potential to, you should contact your St. Louis bankruptcy attorney immediately to discuss your options.