Bank of America and JPMorgan Chase say they’ve fulfilled their obligations to troubled borrowers mandated by a settlement the banks agreed to last year, the Los Angeles Times reports. But despite the banks’ self-reported progress, questions still linger as to the effectiveness of the deal, which aimed to settle claims of systematic and widespread mortgage fraud in the lead up to the financial crisis.
In signing onto the settlement with 49 states and the federal government last year, BofA, JPMorgan, Wells Fargo, Citigroup and Ally Financial agreed to pay out billions to troubled homeowners and revamp the way they manage home loans, a process critics argued was unfair and often damaging to homeowners. In return, prosecutors agreed not to pursue legal claims over the lenders' alleged “robo-signing,” a practice in which bank staff forged documents in an aim to speed up the foreclosure process.
BofA and JPMorgan’s assertions that they’ve fulfilled their obligations under the settlement aren’t official, as Joseph Smith, the monitor for the deal, hasn’t reviewed them yet, according to the LA Times. Wells Fargo also claims to be 90 percent of the way done fulfilling its obligations.
The banks’ claims that they’ve met their end of the bargain may not be enough for struggling homeowners as countless criticisms have arose in the wake of the settlement.
New York Attorney General Eric Schneiderman said earlier this month that he may sue Wells Fargo and BofA, alleging the banks violated some of the settlement’s terms.
Banks have also been less-than-stellar in providing another kind of relief in the deal touted by officials: Principal reduction. Though the settlement requires banks to provide 30 percent of the relief in the form of principal reduction, a February report from Smith found that in the first nine months of the deal, fewer than 50,000 borrowers had received a write down of their loan balance.
Moreover, many struggling borrowers were left out of the settlement. Consumer advocates have said that many of the 8 million borrowers who got foreclosure notices in the past five years won’t see any money from last year's settlement and another similar deal reached earlier this year. For many that do get a payout from the settlements, checks may be relatively small, starting at $500.