$25B mortgage settlement with banks is official

by
March 13, 2012

WASHINGTON – The government has filed a $25 billion settlement with the five largestU.S. mortgage lenders in federal court, putting an official stamp on the landmark agreement announced last month over alleged foreclosure abuses.

The court papers offered few new details on the deal between the federal government and 49 states and Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial.

Oklahoma, which negotiated a separate deal with the banks, is not participating in the agreement.

Banks will pay roughly $20 billion to help borrowers avoid foreclosure. Most of that will go toward reducing loans for about 1 million of the 11 million U.S. households that owe more on their mortgages than their homes are worth.

The banks will also pay $5 billion in cash to the federal and state governments. About a third of that money will go into a fund to be used for sending $2,000 checks to about 750,000 Americans who were improperly foreclosed upon from 2008 through 2011.

Bank of America has the largest financial obligation under the settlement, at $11.8 billion.

The banks will have to complete 75% of their loan-relief requirements within two years and 100% within three years.

The banks didn’t admit wrongdoing as part of the settlement. Federal and state law enforcement authorities could still pursue criminal action against them, the government says. In addition, individuals who believe they were wronged can still sue the banks in civil lawsuits.

The settlement, reached after nearly a year and a half of contentious negotiations, requires the approval of a federal judge in Washington, D.C. It is the largest settlement involving a single industry since the $206 billion multistate tobacco deal in 1998.

To read more, visit: http://www.usatoday.com/money/economy/housing/story/2012-03-12/mortgage-settlement/53502706/1

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