OCC Says Almost 500,000 Seek Reviews of Foreclosures
After a deadline-inspired surge, nearly 500,000 borrowers are seeking formal reviews of their 2009 and 2010 foreclosures for mistakes by lenders, the U.S. Office of the Comptroller of the Currency reported.
“A significant amount of effort was made to increase awareness during the fourth quarter of 2012, and that’s reflected in the increase in the number of people who requested a review,” said Bryan Hubbard, an OCC spokesman. The tally of applicants spiked from 356,000 on Dec. 13 to 495,000 by the Dec. 31 deadline, Hubbard said.
Federal regulators are set to replace the existing victim- by-victim compensation effort with about $10 billion in flat penalties against the banks, according to five people briefed on the talks who asked not to be named because the discussions are private.
A group of 14 of the largest mortgage servicers including JPMorgan Chase & Co., (JPM) Bank of America Corp. and Citigroup Inc. (C) were ordered by the OCC and other banking regulators in 2011 to clean up their foreclosure practices and hire independent consultants to see whether they hurt customers unfairly. The regulators sent letters to 4.4 million potential claimants inviting them to seek reviews.
The 14 firms could be instructed to give lump-sum payments of between $500 and $125,000 in each case involving improper practices, the agencies said in June. No wronged borrowers have been paid, Hubbard said.
It’s unclear how much in payouts the existing system would have resulted in, nor what people would receive in the pending action. Also unclear is whether the independent consultants hired by the lenders will continue to conduct the reviews under the new enforcement action. An announcement of the new action could come as soon as this week, the people said.
Separately, U.S. state attorneys general and federal authorities continue to press regional banks to accept a settlement over mishandled foreclosure documents similar to a $25 billion deal reached with larger competitors last year, according to people briefed on the talks.