Five of the nation's largest banks, Bank of America, JPMorgan Chase, Wells Fargo, Citibank, and Ally Financial, have agreed to a $25 billion settlement deal over wrongful, deceptive, or unfair foreclosure practices. Attorney generals in each state are currently reviewing the deal and must approve it before it goes into effect.
The deal, if approved by the states, will attempt to reshape the mortgage industry and will offer at most about $1,800 to each Greenville NC home owner who went into foreclosure; it will also make it easier for current homeowners to reduce the principle of their mortgage or get loan modifications. It will not, however, help those wrongly foreclosed on regain their property, nor will it fully release banks from future criminal lawsuits by individual states. The settlement would apply only to privately held mortgages issued between 2008 and 2011, not those held by government-controlled Fannie Mae or Freddie Mac.
As part of the deal, about 1 million homeowners could also get the principal amount of their mortgages written down by an average of $20,000. One in four Greenville NC homeowners with a mortgage owe more than their home is worth. These so-called "underwater" borrowers currently have little chance of refinancing.
Under the terms of the agreement, about $17 billion of the total amount would go towards reducing the principle for struggling homeowners, $5 billion would be placed into an account for states to use to help pay homeowners recover from "deceptive foreclosure practices," and $3 billion would be used to cover the cost of helping Greenville NC homeowners to refinance at 5.25%.
Liberal activists and some lawmakers have criticized the ongoing settlement talks, arguing that the Obama administration should launch a broad investigation into the mortgage practices of big banks and push for a settlement that is tougher on the banks. "In a world of Occupy Wall Street, activists across this country are going to be looking at this deal very closely," said Bob Borosage, co-director of Campaign for America's Future. He stated that there should be no "sweetheart deal" with major banks and said a $25-billion agreement would be just a "slap on the wrist."
Although Sen. Sherrod Brown (D-Ohio) said the mortgage servicing problems were "part of a long-standing ugly pattern of homeowner abuse" by large banks that warranted a thorough investigation and prosecutions, Housing Secretary Shaun Donovan told state governors that an announcement will be made within weeks.
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