Feds Announce New Rules and Settlements on Mortgages
By Consumers Union on Friday, January 11th, 2013
It’s been a busy week for new developments affecting mortgage borrowers and homeowners who lost their homes to foreclosure. The Consumer Financial Protection Bureau (CFPB) announced new regulations on January 10 that, when implemented in 2014, will require banks to honestly characterize the full costs of their mortgage loans and lend only to borrowers that have proven that they can meet their loan payments, among other stipulations. According to CFPB head Richard Cordray, these policies are designed to keep borrowers safe from default and to keep the housing market stable. See Consumers Union’s press release about the policies, as well as a report from the Washington Post.
Earlier this week Fannie Mae reached an agreement with Bank of America over bad mortgages that led to record defaults. According to the terms of the settlement, Bank of America will buy approximately 30,000 of the risky loans it had sold to Fannie Mae, and provide additional payouts to it as well. Moreover, Bank of America has agreed to have other firms service many of its loans.
Finally, the Federal Reserve Board and the Office of the Comptroller of the Currency announced a settlement with ten home-loan servicers, including Bank of America, as part of an ongoing effort to compensate mortgage borrowers for wrongful foreclosure procedures conducted by major banks. Aurora, Citibank, JPMorgan Chase, MetLife Bank, PNC, Sovereign, SunTrust, U.S. Bank, and Wells Fargo also participated in the agreement, which overhauls the Independent Foreclosure Review. Borrowers who lost their homes to foreclosure to these banks between 2009 and 2010 (not just those who applied for the Independent Foreclosure Review) will be eligible for compensation from the $3.3 billion fund. The settlement also requires the banks to set aside$5.2 billion in a variety of non-cash benefits to borrowers with outstanding mortgages that include granting loan modifications.
More announcements may come soon, as according to the OCC and Federal Reserve’s press release describing the settlement, the federal government is still negotiating with other participants in the Independent Foreclosure Review in the hopes that they will join the agreement as well. For more information on this settlement, see the Federal Reserve’s website, as well as ProPublica.