By Alan Zibel and Dan Fitzpatrick
Ten U.S. banks reached an $8.5 billion settlement with bank regulators concerning charges of foreclosure-abuses, the regulators said Monday.
Bank of America Corp (BAC), J.P. Morgan Chase & Co. (JPM), Wells Fargo & Co. (WFC) and Citigroup Inc. (C) all signed onto the agreement, while four smaller banks--HSBC Holdings PLC's (HBC, HSBA.LN) U.S. bank division, Ally Financial Inc., OneWest Bank and Everbank--did not.
The settlement resolves allegations of foreclosure improprieties brought by the Office of the Comptroller of the Currency and Federal Reserve in 2011. The banks are eager to complete the settlement because they are due to report fourth-quarter earnings in the coming weeks and want to put the matter behind them. The talks almost collapsed over the weekend after bankers threatened to walk away from the deal if the Fed's demand for an additional $300 million was included, a person briefed on the talks said.
The settlement would end a review process set up in 2011 amid public outrage over banks' foreclosure practices. Swamped with foreclosure filings, many banks used "robo-signers" to sign off on thousands of cases, stating falsely that they personally reviewed each one.
Others signing onto the deal were Aurora Loan Services, MetLife Bank, PNC Financial Services Group (PNC), Sovereign Bank, SunTrust Banks Inc. (STI) and U.S. Bancorp (USB).
The pact would replace a process for reviewing individual borrowers' loan files to determine if they faced financial harm as a result of improper loan processing as the foreclosure crisis worsened. Talks began after large banks voiced concerns with a process set up by the OCC and the Fed over foreclosure-related abuses that surfaced over two years ago.
The OCC decided the deal would benefit fit both sides by giving more money to consumers more quickly and end an open-ended and expensive process for the mortgage industry.
It has become clear that carrying the process through to its conclusion would divert money away from the affected homeowners and also needlessly delay the dispensation of compensation to affected borrowers," Comptroller of the Currency Thomas Curry said. "Our new course of action will get more money to more people more quickly, and it will speed recovery in the nation's housing markets."
Write to Alan Zibel at [email protected] and Dan Fitzpatrick at [email protected]