Nightly News   |  January 07, 2013

Banks reach $8.5 billion settlement for wronged borrowers

After being cited by regulators for foreclosure abuses, ten of the largest U.S. mortgage companies will be providing mortgage assistance and direct payments to those borrowers who were harmed. NBC’s Lisa Myers reports.

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>>> now we turn to the economy, and a settlement between federal regulators and ten of this nation's largest banks . over abuses that caused a lot of folks to lose their houses to foreclosure when they shouldn't have. the total amount here is $8.5 billion. that's a lot of money. sounds like a lot. but critics say, it's just another example of the government letting the banks off the hook while leaving wronged borrowers out in the cold. we get the story tonight from nbc's lisa myers .

>> reporter: it's billed as the largest cash payout yet from banks for abuses during the foreclosure crisis. but critics say, not nearly enough to compensate for the actual damage. in homes and lives. under the agreement between ten banks and federal regulators, 3.8 billion homeowners involved in any stage of the foreclosure process in 2009 and 2010 would receive payments, ranging from roughly $250 to $125,000, depending on the error and level of harm. and what do the banks get? one less investigation.

>> for the banks , this ends this very lengthy process where federal regulators were looking at every foreclosure the banks did and trying to air that dirty laundry in public.

>> reporter: tim nan will be eligible for a payment from his bank. he and his family were foreclosed on in 2010 , after he lost his job.

>> i won't accept it, because it's blood money . and i think people want their homes back. they don't want, you know, few pennies thrown at them like they're trash.

>> reporter: federal regulators argued that this settlement speeds payments and helps more borrowers who don't have to prove they were actually harmed. still, many consumer groups are critical, saying it enables bank to sweep abuses under the rug. what one called a get out of jail free card.

>> what troubles me most, homeowners victimized will not get sufficient compensation.

>> reporter: if the $3.3 billion in cash in the settlement were divided equally among all the eligible homeowners, the average payment would be $868.42. tonight, a spokesman for the bank said this settlement compensates any remaining consumers that may have been harmed and hopefully will lift clouds over the banks so they can lend more and help the housing market recover. lisa myers , nbc news, washington.