US banks have undertaken to pay $ 8.5 billion in the course of foreclosure abuses

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A lot of US banks are still confronted with claims of foreclosure abuses they have committed in times of the financial and housing crisis. Above all, they are blamed for the so called “robo-signing”, which means that plenty of times foreclosures against homeowners were made without examining the documents of each single case in an appropriate way.

On January 7th, 2013, ten US banks (among them Bank of America, Citigroup and Wells Fargo) have entered into a foreclosure settlement arrangement with federal banking regulators. The signatory US banks have undertaken to pay the amount of $ 8.5 billion to former and current homeowners. $ 3.3 billion of this settled amount will be paid directly to American borrowers who went through foreclosure in 2009 and 2010. The remaining amount of $ 5.2 billion is designated to support current homeowners, who are in danger of losing their homes, by reducing their monthly mortgage rate.

As far as foreclosure abuses in the years of 2009 and 2010 are concerned, the settlement enables the involved US banks to bring their outstanding disputes with federal banking regulators to an end.
Homeowners's representatives opinions about the beneficial effect of the settlement to borrowers and homeowners is mostly doubtful. On the one hand affected borrowers may expect quicker financial relief than without the settlement. On the other hand the settlement sum does not nearly cover the total harm homeowners suffered from foreclosure abuses. In addition to that the distribution of the funds amongst homeowners is still unclear.

Author: Cornelia Heim / Rechtsreferendarin Charlotte Office