Authorities and five of the nation’s largest banks have agreed to a $26 billion settlement intended to provide relief to nearly two-million current and former American homeowners harmed by the bursting of the housing bubble. The parties to the negotiations included the U.S. Attorney General and the Attorneys General of every state except Oklahoma. The residents of Oklahoma will not benefit from any of the programs developed to distribute the settlement proceeds. In spite of it being the broadest effort yet to help homeowners is expected to help only a small portion of the borrowers who are delinquent or are facing foreclosure. One-million homeowners are expected to have their mortgage debt reduced, and 750,000 more, who lost their homes to foreclosure will receive checks for about $2,000. This is all assuming this effort will be more successful than past efforts that helped fewer people than expected.
The US Attorney General and the Attorneys General of 49 states reached a settlement with several banks regarding illegal practices in connection with mortgage foreclosure lawsuits. The settlement requires the banks to pay $26 billion, about half of their profits for last year. The money is to be used to compensate owners who lost their homes in connection with the illegal practices and to help underwater homeowners refinance their loans. Is $26 billion enough when there are $700 billion in underwater mortgages in the US?
Also see this article from the New York Times discussing the settlement.
The allegations of wrong doing generally concern “robo-signing” of bank documents, which includes producing sworn to documents admissible in court without the signer actually having any knowledge of the documents contents. See article discussing robo-signing below.