States, Feds to Announce Mortgage Settlement

ForeclosureWASHINGTON (AP) - U.S. states have reached a $25 billion deal with the nation'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.

Under the agreement, five major banks - Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC), Citigroup (C) 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.

Under the deal:

- 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.


Associated Press Writer Michael Virtanen contributed from Albany, NY to this report.

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The borrower and the lender have a shared responsibility and all the information to qualify for a loan is provided by the borrower. Only banks that took federal bailout money are being singled out and punished?Just because the companys had some third party do signings does not and should not change the oblagation of the borrower and if you where not paying your debts then how does signer aka the lenders agent make any difference as to borrowers ability's to satisfy the terms?Just whos money are these banks going to use to pay the government? It will be depositers money or the very money the lenders borrowed from the government so is this just another well crafted bailout???

February 10 2012 at 1:03 AM Report abuse -2 rate up rate down Reply

Rob a Quik trip of $40 and go to jail for 10 years
Rob the country for $trillions and become a cabinet officer or Sec of the Treasury.....

February 09 2012 at 10:25 PM Report abuse +4 rate up rate down Reply

Simply put-POS deal. Only analagy that fits is to imagine the big banks as a single bank robber. This bank robber goes and robs a million dollars from each of 5 banks. He gets caught. He says lets make a deal. The deal is: I get no jail time, I admit no liability, and just to show what a good guy I am, I will even give a total of $2,000 back free and clear to each of the banks I robbed. Yes of course that means I keep $198,000 of the money I robbed from each of those banks plus I am free and clear of any future liability but hec thats a good deal.

Evidently the Feds. and the states decided that that was a good deal. Myself, I puke.....

February 09 2012 at 10:21 PM Report abuse +2 rate up rate down Reply

Once again, money and write downs for everyone except those of us that struggled to stay current on their mortgages, even though our propety values dramatically went down as well. Almost seems like I should not pay the mortgage for 5 or 6 months, then I will get reduced principal, 2-3% loan interest and/or $$ from Obama as well.
Oh well.....

February 09 2012 at 4:14 PM Report abuse +7 rate up rate down Reply

Free houses for all.... thanks to Harry Reed, Barack, Barney, Chris, Nancy... so why is "The White House Occupants" brother still living in a hut?????

February 09 2012 at 3:17 PM Report abuse +2 rate up rate down Reply