The banks that wrongfully foreclosed on people in the robosigning scandal have been ordered to pay those people back by the federal government. Though the individuals who have had to endure this injustice can be repaid, the exact number of people who were foreclosed on without having done anything wrong isn’t known yet.
How banks lose with fees
Federal regulators recently reached a settlement with the financial institutions involved in the robosigning scandal, in which foreclosure proceedings were improperly started against homeowners because bank officers could not be bothered to do their due diligence on the paperwork concerning the state of the homeowners’ personel loans. Part of the settlement agreement, according to Reuters, is that any property owners who were wrongly foreclosed on have to be repaid by the financial institution that did it. Total, there were 14 businesses. USA Today reports that they’re Ally Financial, Aurora Bank, EverBank, HSBC, Sovereign Bank, SunTrust Banks, MetLife Bank, OneWest Bank, PNC, U.S. Bank, Wells Fargo, Bank of America, JPMorgan Chase, Citigroup and Citibank. There will even have to be payments made by loan service businesses MERSCORP and Len! der Processing Services. The institutions will contact impacted homeowners soon.
Total fallout to be determined
The numbers of people that have to get paid or the fines that can be placed have not been added together yet. The banks might end up with $20 billion in fines. This has been recommended by government officials. To further add to the headaches of these institutions, this is only from the settlement with the Federal Reserve, the Office of Thrift Supervision and the Office of the Comptroller of the Currency. Every state lawyer general still has settlements pending along with federal agencies.
Mortgage costs to go up
Banking and real estate insiders are insisting the new legislation and increased regulatory scrutiny will increase the costs of lending a mortgage to a prospective homeowner. There were new rules added on mortgage officer compensation by the Federal Reserve. This means that loan officers will lose commission, reports MarketWatch. Most institutions are no longer giving out commission depending on interest rates on the mortgages. That means a lot of profit will be lost. The customer advocacy group, the Center for Responsible Lending, said that this will eventually be passed on to the customer instead of the banks.