Wronged borrowers caught up in the subprime mortgage meltdown will get some relief from the record $16.65 billion settlement with Bank of America, but a relative few will get help compared to the millions of homeowners affected.
The deal with the second largest U.S. bank for its role in selling shoddy mortgage bonds includes $7 billion targeted for consumer relief. That relief includes a reduction in mortgage balances, new loans for low-income borrowers and aid for neighborhoods left blighted from the foreclosure crisis.
Consumer advocates say those who have already lost theirs homes to a foreclosure or a short sale will likely benefit very little, if at all.
“It is certainly better than nothing,” Bruce Marks, chief executive of the nonprofit Neighborhood Assistance Corporation of America, told the Associated Press. “But for the millions who lost their homes, it reinforces the appearance that the government has not been on their side.”
At $16.65 billion, the BofA deal eclipses a $13 billion settlement, announced in November, between JPMorgan Chase and the Justice Department to resolve similar probes into shoddy mortgage securities.
The Bank of America settlement will be overseen by an appointed “independent monitor” to review the consumer relief. But the selections process could take months. That means “thousands of people who right now are in default or foreclosure” will miss the chance to reduce their mortgage balances, Shanna Smith, president of the National Fair Housing Alliance, told the AP.
Smith’s organization has has filed a complaint with the U.S. Department of Housing and Urban Affairs, claiming that banks failed to maintain properties after borrowers defaulted and left their homes. The alliance said it found that Bank of America allow homes in minority communities in Orlando, Denver, Memphis, Atlanta and other cities to fall into disrepair.