AARP Eye Center
Another deal's been reached related to the foreclosure mess. It seems that homeowners who were rushed to foreclosure improperly will get the biggest payout, up to $125,000, depending on the errors they encountered.
The $8.5 billion deal, reached between 10 mortgage servicers and the Office of the Comptroller of the Currency (OCC) and the Federal Reserve, effectively ends a government-mandated program that examined banks' foreclosure documents for abuses at the height of the housing crisis.
You may remember it as the robo-signing scandal. That's when some lenders came under fire for rushing millions of troubled borrowers to foreclosure without the proper oversight and paperwork.
But OCC officials now say that the government mandate to examine banks' foreclosure documents for abuse wasn't working. They say it was too expensive to hire consultants to examine the banks' paperwork, when that money could have been used to help aggrieved homeowners instead. They also say the program grew too cumbersome.
The OCC says that nearly 4 million borrowers, whose homes were in foreclosure in 2009 and 2010, will get compensation ranging from hundreds of dollars to $125,000, depending on their case.
All in all, $3.3 billion in direct payments will go to borrowers and $5.2 billion will go toward loan modifications and other homeowner assistance programs.
The banks that agreed to the pact include Aurora, Bank of America, Citibank, JPMorgan Chase, MetLife Bank, PNC, Sovereign, SunTrust, U.S. Bank and Wells Fargo.
Other efforts to help troubled borrowers and address foreclosure abuses include a $26 billion settlement last February among five of the nation's biggest banks and a coalition of federal agencies and state attorneys general.
Meanwhile, the number of foreclosures has fallen in the last two years, but experts say the meltdown will affect the housing market for years to come.
The crisis will also affect older adults who lost their homes late in life. According to an AARP report, more than 1.5 million people age 50-plus have lost their homes since 2007, and at least 3.5 million more remain at risk.
The report, "Nightmare on Main Street: Older Americans and the Mortgage Market Crisis," found that mortgage debt has been increasing among older Americans and that more of them are taking it right into retirement.
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