States Close to Settlement with Mortgage Servicers over Foreclosure Shenanigans
Written by Emil Fleysher | January 27, 2012 | Debt
A draft settlement between the nation’s major banks and U.S. states over deceptive foreclosure practices has been sent to state officials for review. Those who lost their home to foreclosure are unlikely to get their homes back or benefit much financially from the settlement. About 750,000 Americans could receive checks for about $1,800 under the deal. However, the agreement could reshape mortgage lending guidelines and make it easier for those at risk of foreclosure to restructure their loans. Also, roughly 1 million homeowners could see the size of their mortgage reduced.
Negotiations have been dragging on for more than a year over fraudulent foreclosure practices. Some states have disagreed over what terms to offer the banks. Now, five major banks and U.S. state attorneys general could adopt the agreement within weeks. The settlement would only apply to privately held mortgages issued between 2008 and 2011. So no government-controlled Fannie Mae or Freddie Mac mortgages apply.
Under the deal: $17 billion would go toward reducing the principal that struggling homeowners owe on their mortgages. $5 billion would be placed in a reserve account for various state and federal programs; a portion of that money would cover the $1,800 checks sent to those homeowners affected by the deceptive practices. About $3 billion would go to help homeowners refinance at 5.25%.
Overall, this deal appears to be another in a long line of political follies that result in a ding in the banks’ bottom lines with no real resolution to the fraud and improper filings, no solution to facilitate any meaningful solution to the housing crisis, and no real relief to struggling homeowners facing foreclosure or eviction.
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