Today federal and state officials announced the largest bank settlement ever reached. The settlement totaling a whopping $25 billion dollars is the second largest state settlement of all time. The banks included in the settlement are Bank of America, JP Morgan Chase, Wells Fargo, Citigroup, and Ally Financial. 49 States have signed onto the settlement with Oklahoma as the only hold out.
The deal is meant to address many of the unethical practices which tripped up so many homeowners and in part led to the housing and foreclosure crisis. Those practices include “robo-signing” and also submitting incomplete paperwork in court.
This is good news for homeowners (but not all) who were hurt when the housing bubble burst. The deal will not address the myriad issues that lead to the crisis and it also will not close the door to criminal liability on the part of the banks.
Via New York Times:
Despite the billions earmarked in the accord, the aid will help a relatively small portion of the millions of borrowers who are delinquent and facing foreclosure. The success could depend in part on how effectively the program is carried out because earlier efforts by Washington aimed at troubled borrowers helped far fewer than had been expected.
Still, the agreement is the broadest effort yet to help borrowers owing more than their houses are worth, with roughly one million expected to have their mortgage debt reduced by lenders or able to refinance their homes at lower rates. Another 750,000 people who lost their homes to foreclosure from September 2008 to the end of 2011 will receive checks for about $2,000. The aid is to be distributed over three years.
While this is welcome news, especially to many homeowners who have been suffering and foreclosed upon, hopefully this is a signal of more to come. Much more can be done to address the practices of banks and “robo-signing” is viewed as a small portion of that and yet it’s the easiest one for prosecutors to target.