Major U.S. banks are nearing a $10 billion settlement to resolve claims that they abused financially troubled homeowners as they sought to foreclose on their home purchase loans at the height of the country's financial downturn.
As millions of U.S. homeowners lost their jobs in 2009 and 2010, they often fell behind on their monthly loan payments, prompting their lenders to take ownership of their properties. But as they moved to foreclose, banks often took shortcuts, automatically signing off on documents even as they falsely claimed they had individually reviewed each homeowner's loan.
Now, officials familiar with the banks' operations say that as many as 14 financial institutions could agree to the $10 billion settlement. The country's central bank, the Federal Reserve, and U.S. financial regulators at the Office of the Comptroller of the Currency, carried out the investigation.
The regulators have said they found “critical deficiencies and shortcomings” in the way the banks handled the foreclosures.
For the first time, homeowners affected by the abuse would be compensated, with about 4.4 million homeowners facing foreclosure in 2009 and 2010 getting at least $250. In addition, 495,000 homeowners who had asked that their cases be reviewed would be paid bigger amounts.