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<h1>Behind the mortgage settlements from the housing crisis</h1>
<h3>
By <a href="http://www.washingtonpost.com/danielle-douglas/2011/02/28/ABgZ1sM_page.html" rel="author">Danielle Douglas</a>, <span class="">Published: May 19</span>
</h3>
<p>Banks have paid less than half the $5.7 billion in cash owed
to troubled homeowners under nearly 30 settlements brokered by the
government since 2008, delaying help to the millions of victims of
discrimination and shoddy lending that epitomized the housing crisis,
according to a Washington Post analysis of government data.</p>
<p>When the settlements were announced, with great fanfare, government
officials hailed them as the long-promised reckoning with the financial
industry. Regulators found that some banks had saddled borrowers with
unaffordable mortgages or assigned higher rates to minorities even when
they qualified for a better deal. Some banks were accused of having
employees “robo-sign” foreclosure documents without reading them or
having proper documentation.</p><p>But consumer advocates and lawmakers
have grown increasingly frustrated by the delays in releasing the
settlement funds, which they say are making it difficult for some
borrowers to recover financially. </p><p>In 2011, Wells Fargo agreed to
compensate up to 10,000 borrowers after the Federal Reserve found the
bank was steering them into subprime loans even though they qualified
for better mortgages. But no borrowers have received money yet. </p><p>Last
year, Bank of America agreed to pay some borrowers between $1,000 and
$5,000 for what the Justice Department called lending discrimination.
The agency said the bank illegally asked some would-be home buyers who
relied on disability income to provide a doctor’s letter verifying the
severity of their ailment. But it’s still unclear how many people will
ultimately be paid. There isn’t a full list of the victims.</p><p>The
agreements are coming under increased scrutiny from state authorities
who are concerned the banks are not living up to their obligations to
help homeowners. The New York attorney general recently threatened to
take Bank of America and Wells Fargo to court to force the banks to
comply with a large national agreement to offer struggling borrowers
help. </p><p>“These settlements are a reflection of the dismal response
from the federal government and the banks to consumers who got bad
mortgages,” said John Taylor, chief executive of the National Community
Reinvestment Coalition, a consumer advocacy group. “Their needs got
pushed behind taking care of the banks.”</p><p>Banking industry
officials and regulators say the scale and complexity of the settlements
have grown over the years, making them difficult to execute quickly.
They can involve multiple agencies, banks, lawyers and consultants. In
some cases, banks are still identifying people affected or waiting for
borrowers to respond to notifications of eligibility. There are also a
number of cases in which banks have yet to zero in on how much they will
pay out. </p><p>“There’s a common misunderstanding that all this
information is readily available and banks can just push a button and
get the checks printed, and that’s not the case,” said Gilbert Schwartz,
a banking lawyer at Schwartz & Ballen. “It requires thorough
review, confirmation and validation that the amounts and the people
receiving it are accurate.”</p><p>In the meantime, borrowers such as
Elizabeth Rizo, 40, have been waiting for years. In 2009, GMAC Mortgage,
which is now known as Ally Financial, foreclosed on her two-story
Tennessee home. The foreclosure occurred while she was negotiating with
the lender to lower her monthly mortgage payments, a “dual tracking”
process that is common among some mortgage servicers but that regulators
have attempted to stop.</p><p>“We woke up one morning and there was a
man on our lawn taking pictures of the house. He told us he had just
bought the house at auction,” said Rizo, who now lives in Redwood City,
Calif. “We couldn’t understand, because we were in contact with the bank
the entire time.” </p><p>It wasn’t until last month that she received a
letter from Ally, which had agreed to compensate borrowers for improper
foreclosures in a large mortgage settlement, indicating that her case
was under review. “I have no doubt that we’ll receive something because
what they did was so wrong,” Rizo said. </p><p>It is still unclear how
much she will receive or when. Ally officials say the bank is making
progress on reviewing such cases but isn’t ready to pay anyone. They
declined to comment on her case in particular.</p><p>In some cases, the money being provided will not be enough to address the problems homeowners are facing.</p><p>Marta
Cruz and her husband were among the 29,000 borrowers notified in April
by SunTrust that they were eligible for a portion of a $21 million
settlement the bank reached with the Justice Department. Prosecutors say
that from 2005 to 2009, the bank charged minority borrowers higher
broker fees and interest rates than white borrowers.</p><p>Cruz, 50, a
nanny who lives in Germantown, is expecting between $500 and $1,000 in
restitution. But that won’t be enough to address her larger problem:
Cruz’s $325,000 home is now worth $180,000, and she is struggling to
make the payments of $2,100 a month. SunTrust has not been willing to
modify her mortgage to make the payments more affordable, Cruz said. </p><p>SunTrust
declined to comment on Cruz’s case, citing customer confidentiality,
but said it was in compliance with the Justice Department agreement.
“Additionally, we work with clients experiencing financial hardship
regarding potential options to assist in maintaining home ownership,”
the company said in a statement.</p><p>Critics point to the 2011
agreement the Office of the Comptroller of the Currency (OCC) and the
Fed struck with more than a dozen mortgage servicers as a prime example
of the dysfunction. After regulators identified flawed foreclosure
processes, including shoddy paperwork, the servicers, including Bank of
America and JPMorgan Chase, agreed to assist homeowners. </p><p>But in
order to determine how much each borrower was owed, the banks planned to
review each foreclosure one by one. After 12 months, no
homeowners had received a dime. But the eight consultants managing the
process on behalf of the banks were paid nearly $2 billion. </p><p>Regulators struck a new agreement with most of the banks involved, including $3.6 billion in direct payments to homeowners.</p><p>“I
think that the OCC, the Fed, greatly underestimated the complexity of
the task,” Daniel P. Stepano, deputy chief counsel for the OCC, told the
<a href="http://www.washingtonpost.com/business/economy/lawmakers-question-use-of-consultants-in-foreclosure-review/2013/04/11/3395de64-a141-11e2-be47-b44febada3a8_story.html">Senate banking committee at a hearing</a>
in April. “The large number of institutions, independent consultants
and counsel involved in the process . . . required substantial
regulatory oversight.” </p><p>More than 3 million borrowers have received checks, some for more than $100,000.</p><p>But
when the first few checks were distributed in April, some bounced.
Another batch of checks sent to nearly 100,000 borrowers were for less
than they were owed. And despite the agreement’s big sticker price, more
than half of the <a target="_blank" href="http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20130409a1.pdf">borrowers affected </a>will receive no more than $300. </p><p>There
are also thousands of homeowners still in the dark about whether they
are entitled to any sort of relief. Ally Financial, One West and
Everbank did not agree to the revised settlement and are reviewing
foreclosures one by one. </p><p>One West declined to comment, and Ally
said it is still reviewing the contested foreclosures. An Everbank
spokesman said in a statement, “We are continuing with our independent
review and expect that we will complete that review by midyear.”
</p><p>Problems are also emerging in the largest mortgage settlement — a
$25 billion deal between state and federal authorities and five banks
accused of using forged paperwork to quickly foreclose on struggling
homeowners. </p><p>The banks agreed to pay $1.5 billion directly to
borrowers. No checks have been sent, though the first are likely to go
out later this month. It has taken more than a year to find the correct
addresses, verify information and receive responses from all of the
borrowers who lost their homes, government officials said. </p><p>The
loudest complaints about the settlement are coming from some of the
people who brokered it. This month, New York Attorney General Eric
Schneiderman, one of 49 attorneys general involved in the deal,
threatened to sue Bank of America and Wells Fargo for failing to help
struggling homeowners.</p><p>The state prosecutor says he has received
339 complaints from homeowners about the behemoth banks dragging their
feet in processing loan modifications that would lower their mortgage
payments — a direct violation of the settlement. </p><p>Officials at Bank of America and Wells Fargo have said they are looking into the issues raised.</p><p>In spite of the complaints, some authorities say having a court-<br align="block">
appointed
monitor has kept the settlement largely on track. The monitor, Joseph
Smith, is expected to release a report on lenders’ compliance with the
settlement agreement next month.</p><p>“There’s no middleman,” said
Maryland Attorney General Douglas Gansler. “Funds aren’t going into some
bank’s escrow account and then drawn out from there. It’s going
basically from the court to the homeowner.” </p><p>Not all of the
mortgage settlements have been problematic. It took Ohio-based Community
National Bank less than a year to deliver $299,288 to 151 customers who
were allegedly forced to pay illegal referral fees on mortgages they
took out between 2005 and 2009, according to the OCC.</p><p>As for the
Justice Department’s cases, Debby Goldberg, special project director at
the National Fair Housing Alliance, said, “Everybody, aside from the
banks involved, would like to see more money going to people, but the
settlements are pretty straightforward in the way they work.”</p><p>
<strong>
</strong>
</p><p>Marlon Correa contributed to this report.</p><p>
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