Latest Foreclosure Settlement Panned By Critics For Letting Banks ‘Sweep Past Abuses Under The Rug’

Federal regulators yesterday announced an $8.5 billion settlement with 10 of the nation’s biggest banks over various foreclosure abuses. According to the Office of the Comptroller of the Currency, “The sum includes $3.3 billion in direct payments to eligible borrowers and $5.2 billion in other assistance, such as loan modifications and forgiveness of deficiency judgments.”

This settlement — which comes in addition to the $25 billion foreclosure fraud settlement crafted last year — is meant to provide redress to homeowners who had to deal with “independent” foreclosure reviews that were not so independent. But Rep. Elijah Cummings (D-MD), for one, believes that the settlement gives banks a pass on their contemptible behavior:

I have serious concerns that this settlement may allow banks to skirt what they owe and sweep past abuses under the rug without determining the full harm borrowers have suffered,” said Rep. Elijah E. Cummings, D.- Md., a member of the House Committee on Oversight and Government Reform and a vocal critical of the government regulators handling of the mortgage crisis.

Other housing and fair lending advocates agree. “For many people this will be the end of the line,” said Diane Thompson, an attorney with the National Consumer Law Center. “This is a much lower number for the banks compared to what they were at risk for.” “The regulators have decided to replace the fox in the henhouse with the wolf,” added John Taylor, president of the National Community Reinvestment Coalition.

“We commend regulators for their ongoing efforts to hold financial institutions accountable for misdeeds during the foreclosure crisis, but the payments in this settlement represent a mere fraction of the total harm inflicted on borrowers and communities,” said Julia Gordon, Director of Housing Finance and Policy at the Center for American Progress. The last foreclosure settlement was gamed by the banks, who counted aid they were providing anyway towards their settlement total.