$25 Billion Foreclosure Settlement

Latest Details on the $25B Foreclosure Settlement

Less than a month after the five largest banks in the nation settled with the federal government over alleged foreclosure mismanagement details begin to trickle out.

The settlement, first announced in February of this year,  was prompted when government officials and banks looked for an out to ‘Help the Public’ when addressing many past foreclosure issues whether policies or habits. In question… the numerous accounts of illegal or questionable foreclosures. The allegations and subsequent settlement sees 25 billion dollars being divided up amongst past and present home owners.

Some of the aid (settlement) are outlined below:

  • The settlement does not free banks from criminal action. Federal and state officials can still pursue criminal action against banks for any wrongdoing over foreclosures.
  • Banks will be required to adopt new processing standards for foreclosure. For example, banks will be unable to pursue a foreclosure when home owners are being considered for a loan modification.
  • Banks have agreed to pay $5 billion to federal and state government officials, with a portion of that money going to compensate about 750,000 Americans who have been found to be wrongfully foreclosed upon from 2008 through 2011. Affected home owners will receive $2,000 checks.
  • Banks have agreed to pay about $20 billion to help home owners avoid foreclosure. The majority of that money will be allocated to reducing the mortgage principal and modifying loans for about 1 million underwater home owners.
  • Banks must comply with the terms of the settlement or face stiff penalties. Banks are required to complete all loan relief requirements as part of the settlement within three years; 75 percent of it is to be fulfilled within two years. Any bank that violates the agreement will be fined $1 million for each violation, capped at $5 million for repeat violations.
  • The mortgage settlement only applies to mortgages held privately. It does not apply to mortgages held by Fannie Mae and Freddie Mac.

Banks that are part of the settlement include Ally Financial, Citigroup, Chase, Wells Fargo and Bank of America.

The penalties for non-compliance vary as some banks have negotiated to reduce their penalties in exchange for cutting principal amounts upon a refinance for suffering homeowners.