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Do $7 billion deals like Citigroup’s help consumers?

July 16, 2014

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This foreclosed home was found in Haymarket, Va. PHOTO: Andrew Taber

This week’s announcement of a federal government settlement with another major mortgage lender is reviving buzz about the mortgage messes that contributed to the economic meltdown, and might be something you’ll want to use a springboard to consumer stories about the home loan market.

The U.S. Department of Justice agreed to end its civil investigations of the lender and to let Citigroup pay $7 billion in fines and “consumer relief” as penance for what the DOJ says were misleading claims to investors about the risks of securities backed by subprime mortgage notes.

As the Associated Press reports,  “the Citigroup settlement comes months after a similar deal between the Justice Department and JPMorgan Chase & Co., the nation’s biggest bank. After months of negotiations, the bank last year agreed to pay $13 billion after an investigation into toxic mortgage-backed securities.”

And the Charlotte Observer notes that “After Citigroup settlement, all eyes on Bank of America” where reportedly talks with the justice department about that company’s role in the have stalled out.

In the past several years, lenders also have reached major settlements with government agencies over issues that came to light after the economic crash.  Several banks settled due to charges they discriminated against black or Hispanic would-be borrowers; others have been forced to pay reparations for shoddy mortgage servicing practices that led to abusive foreclosures and other problems for borrowers and homeowners.

Most of the settlements include one or more elements of consumer relief – from adjusting mortgage balances to, in the case of the just-out Citigroup settlement, help with closing costs for people who lost previous homes and donations toward the construction of affordable housing.  All of the settlements include hefty federal fines and most allow for payments to state agencies or state attornies general.

citibank branch in the rain
Screenshot of AP video from HuffPost Live

But with tens of billions of dollars at play in these settlements – the Charlotte Observer story says Bank of America alone has spent $60 billion – yes, billion with a B – on legal fees, settlements and loan buy-back agreements – I have yet to read anything about any consumer actually benefiting from all of these investigations, negotiations and gyrations.  I think a “where are they now” piece, if you can find some consumers recovering from the effects of the mortgage crisis, could be quite illuminating.  (Particularly about the relative gains by consumers vs. attorneys, government agencies and other who reap dollars from such deals; it always seems, as with class action suits, that the consumer gets pennies on the dollar compared to other entitites.)

You probably can start with your state’s attorney general for pointers to individuals with valid claims under the settlements. (Keeping in mind there doesn’t seem to be central repository of information about all the bank settlements, the AG is probably your closest bet.)

According to Nolo.com, for example, consumer claims from the National Mortgage Settlement of 2012 – a whopping average check of $1,480 to those who lost their homes – have been paid out.

Here’s another informational site on joint state-federal mortgage servicing settlements; it has links to state level information that might help you.

I didn’t find a similar clearinghouse site for the discrimination settlements; again pursue those directly with the Department of Justice and your state’s attorney.

Here’s an interesting source of information:  The Financial Services Litigation Monitor, a blog published by the Perkins Coie LLC legal firm. It might be one to bookmark for a heads-up on other current industry issues.

And keep in mind that a number of scams arise any time these large settlements are announced; you might ask for an update on past enforcement and any caveats for consumers hearing about the recent deals with big banks.


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