Five U.S. banks accused of abuse have signed a settlement with the American government on a plan worth 25 billion dollars to help borrowers, writes Reuters. According to the news agency, investigation of the five banks began after, starting at the end of 2010 banks have signed thousands of documents for automatically enforcing foreclosure. According to U.S. authorities, the five banks involved in this agreement were lending 56% of all real estate loans offered in the U.S. According to the agreement, 750,000 borrowers who have lost their homes through foreclosure during 2008 to 2011 will receive up to $2,000. Banks will also offer other options that will decrease the loan principal and will make changes in the mortgage conditions worth $17 billion for those who are on the verge of foreclosure.
According to the settlement, $3 billion will be used to help borrowers who now have trouble paying loans, but have difficulties to refinance their loans, because the property is worth less than the loan. U.S. government’s announcement yesterday comes after 16 months of negotiations. $17 billion will be set aside for principal reduction and loan modifications for borrowers that are facing foreclosure.
The settlement would be implemented in three years. In the settlement is specified that the US government will drop charges of abusive foreclosure against Bank of America Corp., Wells Fargo & Co., JPMorgan Chase & Co., Citigroup Inc. and Ally Financial Inc. But banks will still face charges related to packaging the mortgage loans, securitized financial instruments and other credit related activities.
California, the state that has accumulated about one third of the value of foreclosures in the U.S. in the last few years, will benefit most from the amount agreed in the settlement, 45%. Bank of America, the institution had suffered most from the housing crisis, will pay the lion’s share – 11.8 billion dollars. About 11 million Americans now own homes worth less than the outstanding mortgage. The settlement, involving 49 U.S. states and federal agencies, including Department of Justice and Urban Development Department is currently the largest compensation deal since the settlement of the U.S. government with the tobacco companies in 1998.
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