Banks to pay $10B for foreclosure abuses

The settlement will go to Americans who lost their homes or are in danger of losing their homes

By Alex Halperin
January 7, 2013 5:02PM (UTC)
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Foreclosed home (via Wikimedia)

Following negotiations between government officials and banks, a $10 billion settlement for foreclosure abuses like "flawed paperwork and botched loan modifications" is expected today, the New York Times reported:

An estimated $3.75 billion of the $10 billion will be distributed in cash relief to Americans who went through foreclosure in 2009 and 2010. Another $6 billion will be directed toward homeowners who are in danger of losing their homes after falling behind on their monthly payments. The deal follows a week of feverish negotiations, and it almost fell apart over the weekend. Some officials at the Federal Reserve threatened to scuttle it unless the banks agreed to pay an additional $300 million for their role in the 2008 financial crisis that torpedoed the housing market and led to millions of foreclosures.

According to the Los Angeles Times:

Banks and regulators worked late Sunday to finalize a nearly $10-billion settlement that would halt a much-maligned program to review foreclosures from the height of the housing crisis, according to four people familiar with the talks.

At least 14 banks are involved. Since the reviews began in late 2011, the banks have paid $1.5 billion to consultants examining foreclosure records -- but not a penny to aggrieved borrowers.

Despite the massive sum, not all comsumer advocates are satisfied. ""There’s been a real lack of transparency in the foreclosure reviews and this settlement,” California director of the Center for Responsible Lending Paul Leonard told the west coast paper.



Alex Halperin

Alex Halperin is news editor at Salon. You can follow him on Twitter @alexhalperin.

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Foreclosure Housing Mortgages U.s. Economy Wall Street