CNBC.com is reporting that GMAC Mortgage will make $230 million in cash payments to borrowers, according to the Federal Reserve. Under the agreement, more than 232,000 borrowers who were in the foreclosure process between 2009 and 2010 will receive compensation. The agreement is similar to deals that bank regulators struck with other major U.S. lenders and mortgage servicers earlier this year.
GMAC Mortgage is a unit of Residential Capital LLC (ResCap).
The Federal Reserve has noted that the $230 million to be paid by GMAC Mortgage includes $32 million that will satisfy GMAC Mortgage’s obligation to provide loss-mitigation assistance. GMAC Mortgage will satisfy its requirement for loss-mitigation assistance with direct borrower payments because it no longer owns a significant residential mortgaging portfolio.
Borrowers whose mortgages were serviced by GMAC Mortgage who accept a payment should not be prevented from taking any action related to their foreclosure. Servicers are not permitted to ask borrowers to sign a waiver of any legal claims they may have against their servicer in connection with accepting these payments.
In April 2011, the government required mortgage servicers to review foreclosure actions from 2009 and 2010 to determine whether borrowers had been unlawfully foreclosed on or suffered some other financial harm due to errors in the foreclosure process. But the independent review proved to be inefficient, with millions of dollars flowing to consultants before payments went out to borrowers.
Earlier this year, the Federal Reserve and the Office of the Comptroller of the Currency announced that banks would instead pay a lump sum to borrowers, based on categories of harm. The Fed said on Friday that with the addition of GMAC Mortgage, roughly 4.4 million borrowers will receive more than $3.8 billion in cash. The servicers will provide an additional $5.8 billion in other relief, including loan modifications and the forgiveness of deficiency judgments.
I applaud the Fed for having GMAC add a little more money to the pool. However, while $230 million may sound like a lot, it’s a lot less than you would think when you consider the scope of the robo-signing fraud. If there were “just” 500,000 robo-signer-supported foreclosures, that equates to less than $500 per homeowner. That doesn’t even offset the foreclosure fees that would have been tacked on to homeowners’ bills.
$230 million is better than nothing. If nothing else, it helps further validate the cries of millions of homeowners that banks really, really, really were playing dirty.