Up to two million Americans could benefit from mortgage relief from the nation’s biggest banks under a foreclosure fraud settlement of $25 billion announced Thursday.
Mississippi and 48 other states signed on to the deal with Bank of America, Citigroup, JPMorgan Chase, Wells Fargo and Ally Financial. The only remaining holdout is Oklahoma. The deal settles charges of systemic and widespread mortgage fraud.
The Associated Press reports the settlement could potentially help more than one million struggling homeowners. The New York Times Thursday reported nearly two million homeowners would be helped.
The settlement is the largest multi-state agreement since the nationwide tobacco settlements in 1998.
Mississippi Attorney General Jim Hood, who was among the 50 attorneys general who took part in the investigation of complaints of massive fraud by the big banks, was unavailable for comment Thursday. Nor has Hood’s office issued a statement detailing what the settlement means for Mississippi’s victims of mortgage fraud by the big banks. No information has been released by Hood’s office on how many, if any, Mississippians who lost their homes during the housing bust would receive the payments of up to $2,000.
Though the deal does offer the payments of up $2,000, its primary thrust is forward-looking, offering partial loan forgiveness or “principal reduction,” to struggling homeowners.
Bob Ryan, a senior official at the Department of Justice, said the deal “benefits struggling homeowners now, not some time in the future when the help they need may be too late.”
Officials were careful to note that the deal does not end the government’s investigation into the housing bust.
“This action, while significant, is only one step of many,” said a spokesperson from the Department of Housing and Urban Development, which served as one of the Obama administration’s lead negotiators on the deal. “But this action is momentous.”
The spokesperson emphasized that the government thoroughly investigated these five banks and will continue to hold those responsible for housing misdeeds accountable.
S0me say the cash payments of up to $2,000 are paltry in comparison to the damage inflicted on displaced homeowners by the big banks. “Their entire lives have been turned upside down and changed,” said Philip Robinson, the acting executive director of Civil Justice, a Baltimore-based nonprofit that has worked with thousands of Maryland families fighting for their homes.
The deal does offer further remedies for the foreclosure victims but it is yet unclear how effective those will be.
In the weeks leading up to the deal, critics charged that any settlement would be too lenient on banks because the administration chose to negotiate a settlement without first conducting a full investigation into the nature and magnitude of the banks’ alleged fraud.
On Thursday morning the HUD spokesperson insisted: “Our work is not done and we will continue to hold those responsible accountable.”
The Obama administration pushed forcefully for the deal to present it to voters in 2012 as evidence that the president is helping homeowners and getting tough on banks.
Splitting a $25 billion deal between five banks, however, will amount to little more than the cost of doing business and is too small a penalty to deter future fraud, many housing advocates say.
The settlement ends a painful chapter that emerged from the financial crisis, when home values sank and millions edged toward foreclosure. Many companies processed foreclosures without verifying documents. Some employees signed papers they hadn’t read or used fake signatures to speed foreclosures — an action known as robo-signing.
Under the deal, 49 states said they won’t pursue civil charges related to these types of abuses. Homeowners can still sue lenders in civil court on their own, and federal and state authorities can pursue criminal charges.
The American Bankers Association released a statement Thursday praising the deal as a way for banks to focus on the future. “Today’s agreement marks an important milestone in resolving mortgage concerns, allowing these five institutions – essential providers of mortgage services across the country – to look to the future with clarity and commitment to customers,” the ABA said.
The association added that it is evaluating the full settlement to ensure its enforcement does not further constrain credit availability and that its terms are not applied outside this agreement.