Bank of America, JPMorgan Chase, Wells Fargo, Citibank & Ally Financial: Agree to $25B Mortgage Deal after Deceptive Practices
The nation’s five largest mortgage lenders have agreed to overhaul their industry after deceptive foreclosure practices drove homeowners out of their homes, government officials said Monday.
A draft settlement between the banks and U.S. states has been sent to state officials for review. The Five Major Banks involved include: Bank of America, JP Morgan Chase, Wells Fargo, Citibank and Ally Financial, along with U.S. State Attorneys General could adopt the agreement within weeks, according to two officials briefed on the discussions. They spoke on condition of anonymity because they are not authorized to discuss the agreement publicly.
The settlement would be the biggest in a single industry since the 1998 multistate tobacco deal. And it would end a painful chapter that grew out of a 2008 financial crisis.
Those who lost there homes to foreclosure are unlikely to get their homes back or benefit much financially from the settlement, which could be as high as $25 billion. About 750,000 Americans; about half of the households who might be eligible for assistance under the deal, will likely receive checks for about $1800.
However, the agreement could reshape long-standing mortgage lending guidelines and make it easier for those at risk of foreclosure to restructure their loans. Roughly, one million homeowners could see the size of their mortgage reduced.
The settlement would only apply to privately held mortgages issued between 2008 and 2011, not those held by government-controlled Fannie Mae and Freddie Mac. Fannie and Freddie own about half of all U.S. mortgages, roughly about 31 million U.S. home loans. Nearly 8 million Americans have faced foreclosure since the housing bubble burst.
About 1 million homeowners could also get the principal amount of their mortgages written down by an average of $20,000. One in four homeowners with a mortgage – or roughly 11 million people – owe more than their home is worth. These so-called “underwater” borrowers have little chance of refinancing.
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.
• $3 billion would go to help homeowners refinance at 5.25 percent.
Comment: “And at the end of the day millions of homeowners and their families are displaced, never to be made whole again and not one person involved [in what could be termed “The Biggest Rape of the People in American History”] will go to jail. Only in America!”
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