After the housing bubble burst way back in 2008, big banks had quite a few foreclosures on their hands. Only they didn’t do a great job of managing those foreclosures. In 2011, the Federal Reserve found banks like Ally Financial, Bank of America, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and SunTrust botched thousands of foreclosures and ordered them to tidy up their mortgage servicing.
And now, finally, in 2018, the Fed has finalized its enforcement action against the remaining banks, fining five of them a total of $35.1 million.
The final fines break out as follows:
- $14 million for Goldman Sachs
- $8 million for Morgan Stanley
- $5.2 million for CIT Group Inc.
- $4.4 million for U.S. Bancorp
- $3.5 million for PNC Financial Services Group Inc.
This is on top of $3.6 billion in cash banks were forced to fork over to consumers in 2013 to compensate them for mortgage servicing errors. And last year federal regulators closed cases against JP Morgan and Wells Fargo for $48 million and $70 million, respectively.
The Fed itself didn’t do a great job of trying to clean up the mortgage servicing flaws, according to Bloomberg:
The regulators first tried to set up what was known as the Independent Foreclosure Review in which the largest U.S. mortgage firms were meant to comb through thousands of foreclosures looking for errors, but the agencies eventually decided that effort was overly time-consuming and ineffective.
So the banks agreed to pay fines instead, but in 2014 the Office of Inspector General accused the Fed of mishandling the settlement with the mortgage servicers. Whether the inherent problems in the banks’ servicing of residential mortgages have been fixed (or whether consumers have been adequately compensated for the errors) is a question for another day, but for now, the case against the banks appears closed.