14 banks ordered to pay homeowners back for bad foreclosures
Federal authorities have ordered more than a dozen large financial institutions to compensate homeowners who were victims of fraudulent foreclosures. The number of homes that were foreclosed because of robosigning have not been totaled up, and the owners of those improperly foreclosed homes will be paid for their anguish.
Largest banks in the nation to pay the price of incompetence
Federal regulators recently reached a settlement with the financial institutions involved in the robosigning scandal, in which foreclosure proceedings were improperly started against homeowners because bank officers could not be bothered to do their due diligence on the paperwork regarding the state of the homeowners’ personal loans. Part of the settlement agreement, according to Reuters, is that any homeowners who were wrongly foreclosed on have to be repaid by the bank that did it. There were 14 companies in all, according to USA Today, including lending companies Ally Financial, Aurora Bank, EverBank, HSBC, Sovereign Bank, SunTrust Banks, MetLife Bank, OneWest Bank, PNC, U.S. Bank, Wells Fargo, Bank of America, JPMorgan Chase, Citigroup and subsidiary Citibank. Loan servicing companies MERSCORP and Lender Processing Services have also been ordered to pay back improper foreclosures. Affected homeowners will likely be contacted by these institutions in the near future to make arrangements.
Total fallout to be determined
It isn’t known yet how many people will be recompensed or how much in fines lenders will have to pay. Some government officials have been recommending up to $20 billion in fines be levied against the financial institutions involved. To further add to the headaches of these institutions, this is only from the settlement with the Federal Reserve, the Office of Thrift Supervision and the Office of the Comptroller of the Currency. Other settlements with other federal agencies are still pending as well as every state attorney general in the nation.
Costs of mortgages to increase
Banking and real estate insiders are insisting that the new legislation and increased regulatory scrutiny will increase the costs of lending a mortgage to a prospective homeowner. New Federal Reserve rules on mortgage officer compensation, according to MarketWatch, may cut into commissions for loan officers. Mortgage brokers and loan officers at lending institutions cannot receive a commission based on the interest rate at which a mortgage is lent at any longer, which analysts predict will eat into profits. The Center for Responsible Lending, a consumer advocacy group that has endorsed reform of financial products from mortgages to payday loans, insists that costs to consumers will not go up, but decreasing revenues are usually passed to consumers in the form of increased costs.