WASHINGTON — U.S. states have reached a $25 billion deal with the nation’s biggest mortgage lenders over foreclosure abuses that occurred after the housing bubble burst.
Federal and state officials announced the deal Thursday. It is the biggest settlement involving a single industry since a 1998 multistate tobacco deal.
Under the agreement, five major banks — Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial — will reduce loans for nearly 1 million households. They will also send checks of $2,000 to about 750,000 Americans who were improperly foreclosed upon. The banks will have three years to fulfill the terms of the deal.
All but one of the 50 states agreed to the deal. Oklahoma, the lone holdout, will receive no money.
The Mississippi Business Journal will have more reaction from state officials and business leaders upcoming.
ORIGINAL POST …
Arizona, Michigan and Florida, three of the states hit hardest by the housing crisis, will join a nationwide settlement over foreclosure abuses, officials with direct knowledge say.
The Associated Press reports that the trio of states will join more than 40 other states in approving a deal said to be in the $25 billion range designed to benefit many Americans who lost their homes or can’t afford their mortgages.
The office of Mississippi Attorney General Jim Hood has not responded to a request for comment on whether Mississippi is inclined to take part in the settlement. If it chooses not to participate, Mississippi homeowners whose homes were foreclosed would not share in the financial payouts that would come from what is believed to be the $25 billion settlement.
The three states’ involvement buoys hopes that a full 50-state deal is imminent, though just how far the settlement goes to letting the nation’s giant banks put the foreclosure fiasco behind them is unclear. Some attorneys general, including the chief law enforcement officers in New York and California, want to be sure the door is still open so that homeowners victimized by bank fraud can still seek damages.
The five lenders — Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial — have already agreed to the settlement. In settling the charges, the states would agree not to pursue further investigations against the banks in civil court. The deal would not protect the banks from criminal investigations.
It would force the five largest mortgage lenders to reduce loans for about 1 million households. The reduced loans would benefit homeowners who are behind on their payments and owe more than their homes are worth. The lenders would also send checks for about $2,000 to hundreds of thousands of people who lost homes to foreclosure.
The nationwide settlement stems from abuses that occurred after the housing bubble burst. Many companies that process foreclosures failed to verify documents. Some employees signed papers they hadn’t read or used fake signatures to speed foreclosures — an action known as robo-signing.
The deal would be the biggest involving a single industry since a 1998 multistate tobacco deal.
Five major states — California, Delaware, Massachusetts, New York and Nevada — are still considering whether to join the settlement. Massachusetts, which filed its own lawsuit against the five major lenders in December over deceptive foreclosure practices, has been quiet about its thinking.
Homeowners in states that opt out of the deal wouldn’t share in the settlement money. The money available to homeowners could run as high as $25 billion if all states approve the deal.