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Federal authorities have required more than a dozen financial institutions to pay back homeowners for wrongful foreclosures. This is the first step in settling the robosigning controversy, where some people were fraudulently foreclosed on. The number of homes which were foreclosed due to robosigning has not been totaled up, and the owners of those improperly foreclosed homes could be paid for their anguish.

Incompetence comes at a price

A settlement over the robosigning that happened has been reached by federal regulators and the financial institutions. The robosigning incident was when there were many putting paperwork through without checking any of the facts first. Part of the settlement agreement, according to Reuters, is that any property owners who were wrongly foreclosed on have to be repaid by the financial institution that did it. USA Today reports the 14 corporations involved were Ally Financial, Aurora Bank, EverBank, HSBC, Sovereign Bank, SunTrust Banks, MetLife Bank, OneWest Bank, and PNC, U.S. Bank, Wells Fargo, Bank of America, JPMorgan Chase, Citigroup and subsidiary Citibank. There will also have to be payments made by loan service businesses MERSCORP and Lender Processing Services. Soon, impacted property owners could be contacted. Arrangements can then be made.

What the total fallout could be

The numbers of individuals that need to get paid or the fines that can be placed have not been added together yet. Government officials like the idea of giving a $20 billion fine to the financial institutions. Financial institutions have even more to worry about. This settlement really only has reached the Federal Reserve, the Office of the Comptroller of the Currency and the Office of Thrift Supervision. Other federal agency settlements nevertheless need to be made. The state attorney generals are also waiting.

Costs of mortgages to increase

Banking and real estate insiders are insisting that the new legislation and increased regulatory scrutiny will increase the costs of lending a mortgage to a prospective homeowner. MarketWatch reports that loan officer commission could be dropped because of new Federal Reserve rules. Most institutions are no longer giving out commission based on rates of interest on the mortgages. That means a lot of profit can be lost. The Center for Responsible Lending, a consumer advocacy group that has endorsed reform of financial goods from mortgages to payday loans, insists that costs to consumers won’t go up, but decreasing revenues are usually passed to consumers in the form of increased costs.

Citations

Reuters

reuters.com/article/2011/04/13/us-financial-regulation-foreclosures-idUSTRE73C3DV20110413?pageNumber=1

USA Today

usatoday.com/money/economy/housing/2011-04-13-wrong-foreclosures-repay.htm

MarketWatch

marketwatch.com/story/home-loan-brokers-face-new-limits-on-pay-2011-04-11