$25B settlement in mortgage abuses

Associated Press

WASHINGTON

A landmark $25 billion settlement with the nation’s top mortgage lenders was hailed by government officials Thursday as long-overdue relief for victims of foreclosure abuses. But consumer advocates countered that far too few people will benefit.

The deal will reduce loans for only a fraction of those Americans who owe more than their homes are worth. It also will send checks to others who were improperly foreclosed upon. But the amounts are modest.

And few think the deal will do much to help struggling homeowners keep their homes or to benefit those who already have lost theirs.

About 11 million households are underwater, meaning they owe more than their homes are worth. The settlement would help 1 million of them.

“The total number of dollars is still small compared to the value of the mortgages that are underwater,” said Richard Green, director of the University of Southern California’s Lusk Center for Real Estate.

Federal and state officials announced that 49 states joined the settlement with five of the nation’s biggest lenders. Oklahoma struck a separate deal with the five banks. Government officials still are negotiating with 14 other lenders to join.

Ohio will receive $335 million in the settlement.

Bank of America will pay the most to borrowers: nearly $8.6 billion. Wells Fargo will pay about $4.3 billion, JPMorgan Chase roughly $4.2 billion, Citigroup about $1.8 billion and Ally Financial $200 million. The banks also will pay state and federal governments $5.5 billion.

The settlement ends a painful chapter of 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.

The deal requires the banks to reduce loans for about 1 million households that are at risk of foreclosure. The lenders also will send $2,000 each to about 750,000 Americans who were improperly foreclosed upon from 2008 through 2011. The banks will have three years to fulfill terms of the deal.