A recent NYT article addresses a payout issue facing banks post housing bubble. Scores of homeowners are anticipated to receive cheques in the mail to compensate them for foreclosure problems they never suffered. Is it too good to be true? What's going on here?
Neither EverBank or the OCC would explain how they arrived at these terms.
It makes sense that people who lost their homes while they were in bankruptcy, forbearance or still paying their mortgage received up to $125,000 — though that figure is arguably low, at least to lawmakers and consumer groups. But it's a bit of a head-scratcher that thousands of people whose foreclosures were not mismanaged will receive $1,050 simply because EverBank wanted to be done with its entire review.
It's also spit in the eyes of the millions of borrowers who received $300 from the 13 mortgage servicers that immediately signed the amended order. To make matters worse, some of the first checks bounced, while a later batch had the wrong amounts.
This is very interesting and confusing as well to me. I wonder if part of it is a way to compensate people for the "collateral damage" of the mortgage abuses. People's houses may have lost value simply because neighboring houses were foreclosing due to mortgage abuses. I can imagine though that banks do not enjoy being under the regulatory spotlight, so if they can just make this one-off fee and look good then they may avoid future litigation and fines.
ReplyDeleteI would have to agree--in part--with Sanjay here. I don't think that there is much concern for collateral damage after the crash in the housing market. I do think it is very likely that the banks are trying to be done with the issue as fast as possible.
ReplyDeleteI believe this is part of the reason why you see big banks like JP Morgan agree to billion dollar settlements--it saves them months (if not years) in court and unwanted attention to their books in the meantime.