U.S. states have reached a $25 billion deal with America's biggest mortgage lenders over foreclosure abuses that occurred after the housing bubble burst.
Federal and state officials announced the deal Thursday. It is the biggest settlement involving a single industry since a 1998 multistate tobacco deal.
Arizona Attorney General Tom Horne said the deal will mean about $1.5 billion to Arizonans. He said most of that will be in principal reduction for homeowners whose mortgages are serviced by the five banks who are "underwater'' on their loans, owing more than their property is worth. It also includes $2,000 cash payments to those customers of the five banks who already have lost their homes.
Under the agreement, five major banks - Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial - will reduce loans for nearly 1 million households. They will also send checks of $2,000 to about 750,000 Americans who were improperly foreclosed upon. The banks will have three years to fulfill the terms of the deal.
All but one of the 50 states agreed to the deal. Oklahoma, the lone holdout, will receive no money.
The conditions will be overseen by Joseph A. Smith Jr., North Carolina's banking commissioner. Lenders that violate the deal could face $1 million penalties per violation and up to $5 million for repeat violators.
The settlement ends a painful chapter that emerged from the financial crisis, when home values sank and millions edged toward foreclosure. Many companies processed foreclosures without verifying documents. Some employees signed papers they hadn't read or used fake signatures to speed foreclosures - an action known as robo-signing.
Under the deal, the 49 states have said they won't pursue civil charges related to these types of abuses. Homeowners can still sue lenders in civil court on their own, and federal and state authorities can pursue criminal charges.
"There were many small wrongs that were done here," said U.S. Housing and Urban Development Secretary Shaun Donovan. "This does not resolve everything. We will be aggressive about going after claims elsewhere."
Bank of America will pay the most to borrowers as part of the deal - nearly $8.6 billion. Wells Fargo will pay about $4.3 billion, JPMorgan Chase will pay roughly $4.2 billion, Citigroup will pay about $1.8 billion and Ally Financial will pay $200 million. This does not include $5.5 billion in federal and state payments.
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 acquired Countrywide in 2008.
The banks and U.S. state attorneys general agreed to the deal late Wednesday after 16 months of contentious negotiations.
New York and California came on board late Wednesday. 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.
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 would apply 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 proposed deal doesn't go far enough. They have argued for a thorough investigation of potentially illegal foreclosure practices before a settlement is hammered out.
Capitol Media Services contributed to this report.
Glaiza K posted at 10:40 pm on Thu, Mar 15, 2012.
Citigroup is the third-largest bank in the country. According to the latest report, Citigroup and three other major United States financial institutions failed the Federal Reserve's latest bank stress test, multiple sources indicate. The stress test is used to give the markets a window into the health of the country's bank industry. Source for this article: Federal Reserve reveals Citigroup, three other banks fail stress test
k33j88 posted at 6:50 am on Fri, Feb 10, 2012.
Ah yes, AP and Capital Media Services-----names you can trust. Anyone interested in swamp land for sale? These news organizations are tools and propagandists for the international global banking cartels. Anyone notice that those being helped are , for the most part, already on the govn't dole? Let's not forget that the monies being released by the banks is a majority of TARP. QE1, QE2, now we have a new and improved version of QE3. Or is it QE4? A trillion here, a trillion there-------did someone get the license plate of that speeding black federal gov't limo? It is all, basically, taxpayer money the "annointed one" is handing out anyways. Lest we forget, Goldman Saks was the biggest contributer to the statist(community organizer) campaign than any other PAC. More federal govn't dependencies = less state control. Time for the "States", of these United States, to re-assurt their authority and control over their own affairs. Refuse any and all federal grant monies which would, in effect, dilute federal authority and jurisdiction. Has anyone noticed how "the annointed one" is using the justice department as a raging dog to bully States into compliance? County sheriffs are our last line of defence and the feds know that all too well.
Juggernaut8000 posted at 5:07 am on Fri, Feb 10, 2012.
S crew any settlement...Why should stupid people who bought an more expensive house than they could afford get any compensation?
How about those who bought a home within their means and have paid their mortgage as agreed upon?
This society awards the stupid and/or weak and punishes the hard working average American.
Homeowner101 posted at 2:01 pm on Thu, Feb 9, 2012.
Better than nothing, but the problem is that it doesn't change anything about what drove illegal foreclosure-related practices. Homeowners need to get unbiased advice from the professionals who are qualified to provide it. Not loan modification advice from housing counselors that only do loan mods. Not short sale advice from the short sale real estate agent. Truly unbiased advice from professionals who have no incentive to push one solution over another: http://www.Homeowner101.com
downtownresident posted at 11:16 am on Thu, Feb 9, 2012.
What a flaming joke!!!!!
After being robbed of their homes and life savings, our lagislators are crowing about a good ole boy settlement that will give 10% of those robbed a whopping $2,000.00 for "compenstaion"
FANNI and FREDI (however they're spelled) execs still made millions on the backs of taxpayers.