A million U.S. homeowners to get help with their mortgages as banks strike landmark $26 billion foreclosure settlement deal
Around a million American homeowners will receive help with their mortgages, thanks to a $26 billion dollar settlement agreed by five of the nations biggest mortgage lenders.
The deal requires five of the largest banks— Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial — to reduce loans for about a million households at risk of foreclosure.
Homeowners who are behind on their payments and owe more than their homes are worth will benefit from the reductions in their debt.
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Hope for many: The settlement ends a painful chapter that emerged from the financial crisis, when home values sank and millions edged toward foreclosure
Around 750,000 more former home owners are to get compensation averaging $1,500 to $2,000, if they improperly lost their homes to foreclosure from 2008 to the end of 2011.
The settlement, which took more than a year to finalise, was announced at a 10am EST news conference by Attorney General Eric Holder.
The debt relief has to be extended by the mortgage providers within three years or they must pay the rest of the settlement in cash.
The reduction ends a painful chapter that emerged from the financial crisis, when home values sank and millions edged toward foreclosure.
Plummeting house prices have put many homeowners under water, where the house is worth less than what the owner paid for it, since the collapse of house prices.
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.
The deal is the biggest involving a single industry since a 1998 multi-state tobacco deal.
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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 only last night.
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.
Changing face of borrowing: President Obama said 'the deal turns the page on a 'reckless era'
Speech: President Obama speaks about the details of a $26 billion housing settlement between federal and state officials and mortgage lenders
Historic deal: Attorney General Eric Holder announced the settlement at a 10 am EST news conference
The settlement ends a painful chapter that emerged from the financial crisis, when home values sank and millions edged toward foreclosure. In
UNDER THE DEAL
The five banks must pay out:
- Roughly $1.5 billion for direct payouts, in the form of $2,000 checks, for about 750,000 Americans who were unfairly or improperly foreclosed upon; another $3.5 billion will go directly to states.
- At least $10 billion for reducing mortgage amounts.
- Up to $7 billion for other state homeowner programs.
- At least $3 billion for refinancing loans for homeowners who are current on their mortgage payments but who are underwater.
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.
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.
President Barack Obama says a $25 billion settlement between mortgage lenders and states over foreclosure abuses “will begin to turn the page on an era of recklessness that has left so much damage in its wake.”
Obama says the landmark deal between the five largest mortgage lenders and 49 states won’t heal the housing market by itself. But he said: 'This settlement is a start'
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