U.S. regulators led by the Office of the Comptroller of the Currency will replace a largely fruitless effort to find victims of botched foreclosures at the 14 biggest mortgage servicers with flat penalties, five people briefed on the talks said.
Bloomberg reports that Bank of America, Wells Fargo, JPMorgan Chase and New York-based Citigroup are among servicers that may make concessions totaling about $10bn, said the people, who requested anonymity because the discussions are private. The funds would compensate borrowers whose homes were wrongfully seized using faulty paperwork and aid homeowners in danger of default, the people said.
The penalties would supplant a system allowing borrowers who lost homes in 2009 and 2010 to seek compensation after foreclosure reviews. The program, which housing advocates said failed to reach its intended targets, was set up under consent decrees the banks signed with regulators in 2011. It drew 356,000 applicants out of what the advocates said were 4.4m eligible borrowers. Today is the application deadline and no borrowers have yet received compensation, the OCC said.
'They’re trying to fix a system that was faulty from the beginning', Ira Rheingold, executive director of the National Association of Consumer Advocates, said in a phone interview. 'The people in charge created a program that was not designed to help homeowners. They’ve been trying in fits and starts to improve it. I think at some point they threw up their hands and said, ‘This is not working.’'
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