But consumer advocates and lawmakers have grown increasingly frustrated by the delays in releasing the settlement funds, which they say are making it difficult for some borrowers to recover financially.
In 2011, Wells Fargo agreed to compensate up to 10,000 borrowers after the Federal Reserve found the bank was steering them into subprime loans even though they qualified for better mortgages. But no borrowers have received money yet.
Last year, Bank of America agreed to pay some borrowers between $1,000 and $5,000 for what the Justice Department called lending discrimination. The agency said the bank illegally asked some would-be home buyers who relied on disability income to provide a doctor’s letter verifying the severity of their ailment. But it’s still unclear how many people will ultimately be paid. There isn’t a full list of the victims.
The agreements are coming under increased scrutiny from state authorities who are concerned the banks are not living up to their obligations to help homeowners. The New York attorney general recently threatened to take Bank of America and Wells Fargo to court to force the banks to comply with a large national agreement to offer struggling borrowers help.
“These settlements are a reflection of the dismal response from the federal government and the banks to consumers who got bad mortgages,” said John Taylor, chief executive of the National Community Reinvestment Coalition, a consumer advocacy group. “Their needs got pushed behind taking care of the banks.”
Banking industry officials and regulators say the scale and complexity of the settlements have grown over the years, making them difficult to execute quickly. They can involve multiple agencies, banks, lawyers and consultants. In some cases, banks are still identifying people affected or waiting for borrowers to respond to notifications of eligibility. There are also a number of cases in which banks have yet to zero in on how much they will pay out.
“There’s a common misunderstanding that all this information is readily available and banks can just push a button and get the checks printed, and that’s not the case,” said Gilbert Schwartz, a banking lawyer at Schwartz & Ballen. “It requires thorough review, confirmation and validation that the amounts and the people receiving it are accurate.”