Big Banks Pinky-Swear To Overhaul Lending & Foreclosure Practices

Nearly a half-decade after the U.S. housing market collapsed like something that collapses really badly, the country’s five biggest mortgage providers — Bank of America, Chase, Wells Fargo, Citi and Ally — are oh-so-close to reaching a settlement with the states that could include overhauls to how they operate when it comes to the whole lending/servicing/foreclosing process.

The settlement is currently being reviewed by the states and could result in checks of around $1,800 each for approximately 750,000 people who were affected by these banks’ deceptive lending and foreclosing actions. Additionally, there are around 1 million underwater homeowners (i.e., people who owe more than their houses are worth; not people who own homes located under the ocean) who could see their mortgages adjusted down by an average of $20,000.

That part of the settlement only deals with a small portion of the people whose homes are worth less than the value of the mortgage, but the bigger-picture hope is that the proposed changes will help prevent a similar debacle from taking place in the future.

While no specifics are available, Reuters reports that, in addition to changing lending guidelines, the settlement conditions could help those on the precipice of foreclosure get their loan restructured.

Opponents of the settlement say that the banks are being given a pass on their past transgressions — like the whole “hiring thousands of unqualified robo-signers to rubber stamp foreclosures without reviewing a single piece of paper” thing — all for a vague promise of not behaving badly from now on.

“Wall Street again is trying to pass the buck. Instead of criminal prosecutions, we’re talking about something that’s not more than a slap on the wrist,” says Sen. Sherrod Brown of Ohio.

On Monday morning, protesters of the settlement gathered outside the Chicago office building where Democratic attorneys general from the states were discussing the proposed settlement with Obama administration officials.

Protests intensify as mortgage settlement nears [Reuters]
Mortgage lending settlement, overhaul on way to states [Chicago Tribune]