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Banks forced to pay for foreclosure faults

U.S. bank regulators announced settlements yesterday with the largest home lenders over allegations of shoddy foreclosure practices, but the pacts did not include financial penalties.

U.S. bank regulators announced settlements yesterday with the largest home lenders over allegations of shoddy foreclosure practices, but the pacts did not include financial penalties.

The banks agreed to compensate borrowers who were wrongly foreclosed upon and to overhaul their mortgage operations. Fines are to be determined later.

The Office of the Comptroller of the Currency, the Federal Reserve and the Office of Thrift Supervision reached the settlements with 14 of the largest U.S. financial institutions, including Bank of America, Wells Fargo, JPMorgan Chase and Citigroup.

Federal regulators and state attorneys general have been investigating bank mortgage practices that came to light last year, including the use of “robo-signers” to sign hundreds of unread foreclosure documents a day.

“Our enforcement actions are intended to fix what is broken, identify and compensate borrowers who suffered financial harm, and ensure a fair and orderly mortgage servicing process going forward,” acting OCC head John Walsh said in a statement.

Mortgage lenders still face a probe by a group of state attorneys general and other federal agencies, including the U.S. Justice Department.

The deal

Under the agreement, servicers would have to hire an outside consultant to review foreclosure actions that took place between January 2009 and December 2010.

Lenders would have to provide a single point of contact for borrowers involved in a foreclosure or loan modification program so they have a direct line to the servicer.

Servicers would also be prohibited from so-called “dual tracking,” the practice of starting a foreclosure while a loan modification is pending.

 
 
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