During the home mortgage crisis, many homeowners faced foreclosure. Banks took back homes when people could not afford to pay the mortgage. Oftentimes when this happened, the value of the homes was lower than their mortgages. Banks made many errors during this process, notably in 2009 and 2010. According to a recent New York Times article, banks assessed improper foreclosure fees and did not let people refinance their homes even if that would stave off foreclosure.
In recent years, banks have been held more accountable for their practices and have settled with federal regulators agreeing to pay large fines. One settlement over the foreclosure practices mentioned cost fifteen banks nearly $10 billion. Before this settlement came to be, it was necessary to conduct a study so that banks and federal regulators and watchdogs could calculate the fine. In this case, the Independent Foreclosure Review serviced as the basis for the settlement agreement. In this review, banks were supposed to look at old papers associated with foreclosures to count the number of improper actions. This data was going to be used to determine how much money to pay out to affected homeowners. The investigation turned out to be very time consuming and costly, so all but one of the 15 banks stopped their investigation early. They used the data that they had and assumed that the rest of the files were the same or similar.
The banks and the regulators faced criticism for not completing the investigation. Nevertheless, the banks, in total, agreed to pay $3.9 billion to their clients affected by foreclosure. The bank that did finish its investigation, OneWest, paid $8.5 million to qualified victims of improper financial practices. Payments were sent out to 5.6% of homeowners that were in some state of foreclosure with OneWest. Other banks paid much more. For example, after reviewing 9.6% of the files, Wells Fargo found that it erred in 11.4% of the cases. It is possible that 11.4% is the true number of improper foreclosures, but we will not know that for certain because the review was not completed. Wells Fargo ended up paying out $37 million, and that may not have been an accurate payment. Morgan Stanley agreed to pay $114 million. While the investigation was proving expensive and was not completed, it still showed the banks made many errors that led to some people wrongfully losing their homes in some cases.
If you are in a difficult financial situation and are considering bankruptcy, then you should speak with a qualified lawyer who can help you throughout the process, filing a petition and representing you at a hearing. Jayson Lutzky has over 31 years of experience practicing law in New York. He offers free, initial, in-person consultations. Call 718-329-9500 to set up an appointment or visit www.MyNewYorkCityLaywer.com to learn more about bankruptcy.