This week brought three big developments to the nation's beleaguered mortgage landscape. For consumers, the complex moves have been mostly mystifying, but experts say they all aim at turning the page.
"There is a strong desire to put behind us all this period of time -- the aftermath of the darkest period in American finance. All these things [announced this week] are intended to do that," said John Taylor, president and CEO of the National Community Reinvestment Coalition, a Washington, D.C.-based community advocacy group. "There are good and bad things in it for consumers.''
A new rule issued Thursday by the Consumer Financial Protection Bureau aims to prevent lenders from making the sort of toxic mortgages that forced many unsuspecting borrowers into ruin. Yet the new "qualified mortgage" rule, according to some lenders, also could perpetuate the nation's tight credit problem and keep many would-be homebuyers on the sidelines.
Meanwhile, two settlements unveiled Monday with big banks should resolve some lingering issues from the mortgage meltdown that have kept banks focused on past errors instead of getting back to the business of lending.
Here is a quick primer on the week's developments and some likely implications for consumers.
The Office of the Comptroller of the Currency, which regulates nationally chartered banks, Monday unveiled an $8.5 billion settlement with 10 giant banks that service mortgages.
As part of the controversial settlement, the OCC is scrapping its Independent Foreclosure Review, which was aimed at identifying victims of robo-signing and other improper foreclosure tactics by banks, but soon proved to be a badly flawed effort.
Instead, under the OCC's new approach -- which will be spelled out in enforcement actions in a couple of weeks -- more than 3.8 million borrowers who faced foreclosure between Jan. 1, 2009 and Dec. 31, 2010 stand to get some payment regardless of whether they actually suffered any harm.
The mortgage servicing banks covered are Bank of America, Wells Fargo, Citibank, JPMorgan Chase, SunTrust, PNC, Sovereign, U.S. Bank, MetLife Bank and Aurora.
The agreement provides for $3.3 billion to go directly to borrowers. Another $5.2 billion is earmarked for loan modifications and the forgiveness of deficiency judgments.
The OCC said the amount that eligible borrowers get will range from a few hundred dollars up to $125,000, depending on the type of error that possibly occurred in their mortgage servicing.
"If a borrower went through foreclosure with one of those 10 lenders, they should receive a couple hundred bucks, whether they deserve it or not," said Guy Cecala, publisher and CEO of Inside Mortgage Finance Publications in Bethesda, Md., which tracks news and statistics in the residential mortgage industry. "The odds of getting $125,000 is the odds of winning the lottery. It would have to be a false foreclosure or where they were thrown out of their house illegally."
The OCC will look to 13 broad categories of errors outlined in the Independent Foreclosure Review launched in April 2011.
Those include a litany of bumblings and misdeeds by the mortgage servicers, ranging from foreclosing on a homeowner who was following the rules during a trial period of a loan modification, to failing to offer a loan modification as mandated under a government program, to failing to follow up with a borrower to obtain needed documents under a government program.
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