Banks Face Penalties for Mishandling Foreclosures

by Peter Vernon on Foreclosure Crisis

The number of foreclosures across the country amidst the economic crisis and housing market crash has all but subsided. There have been numerous complaints and outcries by those facing foreclosures in regards to the actions of banks during these foreclosures. Finally, regulators are taking a stand and are taking steps to hold these banks accountable for these mishandlings.

So far, fines have not been imposed but these financial penalties are sure to come in the near future, especially for large banks such as Wells Fargo, J.P. Morgan Chase, Bank of America, and Citigroup along with several other smaller banks. A total of $20 billion will be collected from these banks collectively in civil fines or in assisting borrowers that are distraught. Furthermore, these banks have two months to create solid plans to revamp their mortgage processes to better assist their borrowers.

The best part of this plan is the requirement for these banks to have someone from the outside come in, evaluate their foreclosure processes over the last year, and determine what the bank did that led to unjustified foreclosures on many Americans. Finally, each bank must also have adequate staff to assist with the increased number of foreclosures currently taking place in comparison to “normal” years.

Now, only time will tell if these regulators and the government step in to make these banks go a step further and reduce the standards being placed on buyers; high standards that are preventing qualified people from being able to secure home loans. Although it is great to finally see the banks being held accountable, there is still a lot more work to be done to help the market get back on the path to recovery. Potential homebuyers are unable to secure loans to purchase foreclosed and new properties, keeping the real estate market stagnant. The penalty steps are great, but they are only a small step into the right direction of holding these banks accountable.