Yesterday, President Barack Obama announced a historical settlement of a long-running probe into allegedly shoddy foreclosure practices at the nation’s five largest loan servicers.
Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial (formerly known as GMAC) agreed to pay $26 billion to compensate homeowners in the “robo-signing” scandal. This is the largest settlement involving a single industry since a 1998 multistate tobacco deal,
“We have reached a landmark settlement with the nation’s largest banks that will speed relief to homeowners,” Obama said, laying out a deal he said will “begin to turn the page on an era of recklessness that has left so much damage in its wake.”
The deal will provide some relief to financially distraught homeowners in danger of losing their homes while making it easier for current borrowers to refinance. The lenders will also send $2,000 each to about 750,000 Americans who were improperly foreclosed upon from 2008 through 2011.
The settlement, a year in the making, also seeks to reform mortgage servicing practices to lessen the chances of similar problems occurring again. The banks will have three years to fulfill terms of the deal.
However, this deal will not help former homeowners get back properties they lost to foreclosure, even if there was wrongdoing by loan servicers in the foreclosure process.
Critics have been quick to point out that the settlement money represents a mere sliver of $700 billion in negative equity in the nation’s housing market. They also noted that deal excludes loans owned by government, controlled Freddie Mac and Fannie Mae — agencies that hold about half of the nation’s mortgages.
Though many beneficiaries of this settlement are pleased, I don’t think this deal will have much impact on the sluggish housing sector in the US. That’s because this settlement will only reduce loans for about 2 million of the 11 million homes that are currently underwater, meaning they owe more than their homes are worth.
What do you think? Are you satisfied with this settlement? Do you think it should have been for more money? Join the discussion at TheStockEnthusiast.com after the break!
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