On Thursday, state and federal government representatives announced that five major banks—Wells Fargo, Bank of America, Ally Financial, Citigroup and JPMorgan Chase—had agreed to pay their part in a settlement of more than $25 billion stemming from the mortgage market meltdown that caused millions of Americans to lose their homes and sent the economy into a near-death spiral. U.S. Attorney General Eric Holder called the settlement the largest of its kind.
Here are some details of the big deal. Is it too little, too late? —KA
The Washington Post:
Under the terms of the deal, banks would have three years to complete principal writedowns, refinancings and other relief. But officials said they structured the deal so that it provides incentives for actions taken within the first 12 months, in an effort to get aid to homeowners sooner rather than later.
The settlement also includes about $17 billion that would go toward foreclosure-prevention measures, such as lowering the loan balance for borrowers who owe more than their homes are worth. Banks would be given varying “credits” for different ways in which they write off existing debts.
Other provisions would provide for lowering interest rates for homeowners who are current on their loans. In addition, as many as 750,000 borrowers who lost their homes to foreclosure since 2008 would be eligible for payouts of about $2,000 each, without surrendering the right to join future lawsuits, state officials said.
AP / Cliff Owen
Attorney General Eric Holder, center, accompanied by HUD Secretary Shaun Donovan, right, Iowa Attorney General Tom Miller, and other federal and state officials announces a settlement regarding mortgage loan servicing and foreclosure abuse at the Justice Department in Washington on Thursday.