$25B foreclosure-abuse settlement reached

WASHINGTON -- Federal officials say the five largest mortgage lenders have reached a $25 billion settlement with 49 states over foreclosure abuses that took place after the housing bubble burst. They will have three years to fulfill the terms of the landmark deal announced Thursday.

The deal also ends a separate investigation into Bank of America and Countrywide for inflating appraisals of loans from 2003 through most of 2009. Bank of America will pay $1 billion to settle that federal probe.

Oklahoma is the lone holdout and will receive no money.

Five major banks -- Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial -- will pay $25 billion to reimburse American homeowners and overhaul their industry.

Home foreclosures decline, but completions rise
Nationwide foreclosure act gains momentum

Many companies that process foreclosures failed to verify documents. Some employees signed papers they hadn't read or used fake signatures to speed foreclosures -- an action known as robo-signing.

The deal is the biggest involving a single industry since a 1998 multistate tobacco deal. It would force the five mortgage lenders to reduce loans for about 1 million households. The reduced loans would benefit homeowners who are behind on their payments and owe more than their homes are worth.

In addition, another 750,000 Americans -- about half of the households who might be eligible for assistance under the deal - will likely receive checks for about $1,800 each.

The banks and U.S. state attorneys general agreed to the deal late Wednesday after 16 months of contentious negotiations.

The deal "holds mortgage servicers accountable for abusive practices and requires them to commit more than $20 billion towards financial relief for consumers," said Attorney General Eric Holder. "As a result, struggling homeowners throughout the country will benefit from reduced principals and refinancing of their loans.

"The agreement also requires substantial changes in how servicers do business, which will help to ensure the abuses of the past are not repeated."

New York and California came on board late Wednesday, according to a person close to the negotiations. The source was not authorized to disclose the agreement before Thursday's announcement.

California has more than 2 million "underwater" borrowers, whose homes are worth less than their mortgages. New York has some 118,000 homeowners who are underwater.

The settlement ends a painful chapter that emerged from the financial crisis, when home values sank and millions edged toward foreclosure. In addition to the payments and mortgage write-downs, the deal promises to reshape long-standing mortgage lending guidelines. It will make it easier for those at risk of foreclosure to make their payments and keep their homes.

Those who lost their homes to foreclosure are unlikely to get their homes back or benefit much financially from the settlement.

The settlement applies only to privately held mortgages issued from 2008 through 2011. Banks own about half of all U.S. mortgages - roughly 30 million loans.

Some critics say the deal doesn't go far enough. They have argued for a thorough investigation of potentially illegal foreclosure practices before a settlement is hammered out.

Under the deal:

[RobertWomer]

I personally think that bankruptcy is much better than foreclosure. You seem to bounce back from bankruptcy a lot faster now days. They have secured credit cards and all kinds of ways to rebuild you credit. But foreclosure is more like an event that even with recovered credit, could keep you from buying another home. Even if the information is no longer on your credit report after seven years, your lender is still going to ask you is you had any previous foreclosures or not. There's an article below that talks about using loan mods and/or bankruptcy to stop the foreclosure process that I liked.

http://www.reversemortgagelendersdirect.com/reverse-mortgage-calculator/
http://www.reversemortgagelendersdirect.com/reverse-mortgage-rates/
http://www.reversemortgagelendersdirect.com/how-does-a-reverse-mortgage-work/

[Shaymalaya98]

i wish the goverment an presedent obama would look into helping people get out of forclosers an making banks that refuse to work with people or don't even return calls like vermont housing finace agency does they won't work with people they just start foreclosing taking peoples homes that they worked hard for alot of which are low income then they get hit with high attorney fees for mortgage companies then you receive papers from vhfa lawers on day to renstate mortgage then they want payment next day i wish vhfa was made to modify peoples mortgages instead of taking peoples home this is a serious matter an should be looked into its not fair for this mortgage company not to do this for people no matter what instead of taking there homes the attorneys get rich well the low income people lose there most that matters to them their homes they don't care if you have kids or not then families are put out in the road please look into this mortgage company because somethings wrong you wouldn' t think they would want to put a family in the street with out working with them very un fair please help us low income people stay out of forecloser an the ones who are in forecloser with vermont housing finance agency

[venusvegasvada]

25 Billion and a free pass.

Right. Trillions and Trillions and the best we can come up with is a measly 25 Billion.

I guess that just goes to show who bought the Govt and who paid for the laws to be written that way in the first place.

[Mike_in_USA]

No jail time for anyone? Just goes to show our justice system at work--if you have enough money, you are above the law. Only little people need to obey the law.

[rightbehind]

Looks like the banks have just bought their freedom from prosecution. They robbed the nation of more than 700 billion.

[cheeksforus]

This is Obama shaking down the banks, give me a break. Notice it comes at a politically pointed one, re-election. Franks, Dodd and a few others are and have been at the core here. They forced banks to loan money to people they knew would not be able to re-pay and now they are being forced into a politically motivated scam to pay more money. If all the bad loans that Barney and company were taken off the table I wonder what the housing market would look like right now. Their greed and motivation for votes cost us all tons of money. Liberals !!!!!

[dmcar2000]

If only the American homebuyer did not get so greedy and sought to buy only a home they can afford. But hey, who has time to do the math. I guess they knew they can always turn to the government to bail them out.

[js2212]

by Parrots10 February 9, 2012 11:37 AM EST
Are you 'underwater' on your mortgage ?? if not, why do you even care ??? Cept to make a perceived political point. Dumb Dumb Repugs
___________________________________________________________________

And "dumb dumb Repugs" would appear to be a perceived political point as well LOL It seems you are so in a lather you will literally make up a reason to deliver a political insult. Get over yourself.

[soap-suds]

What a shallow deal. Another big-sounding settlement number that amounts to very little for individual recipients. It probably represents a very small number relative to the banks' yearly profits and value, and thus provides no punishment.

Hopefully a federal judge will have to review this and then and toss it!!!