Tens of thousands of homeowners who were the victims of robo-signing are finally starting to see compensation this week for the enormous financial difficulty they were put through by their banks.
As part of a settlement with 49 state attorneys general, five major mortgage companies will begin sending out checks on Monday for around $1,500 to people who faced foreclosure after their banks automatically approved mortgages with little or no oversight. The banks included in the settlement are Ally Financial, Bank of America, Citigroup, J.P Morgan Chase, and Wells Fargo. The agreement also includes money dedicated to state affordable housing efforts.
Before the housing bubble burst, robo-signing was a common practice at major financial institutions. Banks started robo-signing in 1998 and didn’t stop once the bubble burst in 2008. Banks also robo-signed credit card documents.
All along, the practice was incredibly risky, both for the banks and those they were lending to; when people are issued mortgages they cannot afford with no verification of assets or income, it becomes increasingly likely that they will fall behind on their payments, putting their own financial stability, and the bank’s, at risk. But while the banks received financial assistance right away in the form of bailouts, homeowners had no such luck. Largely, they were forced to declare bankruptcy.
Only those who submitted a claim will be eligible for the settlement money being sent out this week. Though its a paltry sum per individual, compared to the costs of losing a house, it will amount to tens of thousands of people: 50,000 in Georgia, 5,300 in New Jersey, 10,470 in Maryland, 1,300 in Maine, and 10,000 in Massachusetts, to name a few.