Government officials announced this week that some of the nation’s largest banks will be forced to fork over $25 billion as a penalty for fraudulent and reckless behavior during the recent housing boom and bust.
The nation’s leading banks are forced to pay $25 billion in cash and modifications.
The settlement, which will affect five of the United States’ largest banks—Bank of America, Ally, Citigroup, J. P. Morgan Chase, and Wells Fargo—will be divvied out in the form of loan modifications and cash payments to former borrowers. Those who have lost their homes via improper foreclosure processes may receive payments of roughly $1,500 to $2,000. Those who are underwater and wanting to stay in their homes may see loan principal reductions and enhanced refinancing options.
Government officials lauded the settlement as a “step in the right direction,” and an opportunity for “abused” borrowers to receive either monetary remuneration or more assistance in modifying onerous home loans. However, some housing reform advocates and sector watchdogs insist that the settlement amounts nothing more than a slap on the wrist for the banks, and will do little to deter misbehavior in the future.
Critics of the settlement have also suggested that the financial benefits are “too little, too late” for families that have seen their financial and emotional lives devastated by the fallout of the housing bust, and the subsequent plummet in home prices. Under the auspices of the agreement, it may take up to three years for borrowers to see benefits from the recent deal.
Despite complaints and concerns expressed by state attorneys general during the settlement talks, ultimately 49 of the 50 states signed onto the agreement, with Oklahoma the lone standout. California, home to the largest real estate market in the country and some of the worst fallout from the bust, will receive roughly $18 billion of the settlement funds.
See also:
Robo-Signing Loan Settlement Battle
A New Victims Fund For Those Affected by Robo Signing
Obama’s 2012 Mortgage Refinancing Plan
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It seems like a small solution to a large problem, but at least it’s a start. No one seems to know who qualifies for anything though.
This is really important news and maybe will put a dent in the problem. For those homeowners who have done all of the right things-perhaps with a small mortgage and large downpayment, there seems to be no “Thank your”.
While the solution is certainly a start, there needs to be a fundamental change in the philosophy, business model and financial conversation in this Country for us to see sustained change.
I am happy to see that the majority of money will be coming to California but I really don’t think it is going to make much difference for most homeowners in trouble.