Home > Avid Law Center, Foreclosure > Nationwide Draft Settlement Does Little for Homeowners

Nationwide Draft Settlement Does Little for Homeowners

According to the Associated Press, a $25 billion draft settlement between the nation’s major banks and U.S. states over deceptive foreclosure practices has been sent to states for review.

Negotiations between banks and state attorneys general have been dragging on for more than a year over the fraudulent foreclosure practices that drove millions of Americans from their homes during the housing crisis.

While those who lost their homes to foreclosure are unlikely to get their homes back or benefit much financially from thesettlement, it could reshape long-standing mortgage lending guidelines and make it easier for those at risk of foreclosure to restructure their loans.

According to the AP:

The settlement would only apply to privately held mortgages issued between 2008 and 2011, not those held by government-controlled Fannie Mae or Freddie Mac. Fannie and Freddie own about half of all U.S. mortgages, roughly about 31 million U.S. home loans.

As part of the deal, about 1 million homeowners could also get the principal amount of their mortgages written down by an average of $20,000. One in four homeowners with a mortgage — or roughly 11 million people — owe more than their home is worth.

Under the deal:

— $17 billion would go toward reducing the principal that struggling homeowners owe on their mortgages.

— $5 billion would be placed in a reserve account for various state and federal programs; a portion of that money would cover the $1,800 checks sent to those homeowners affected by the deceptive practices.

— About $3 billion would to help homeowners refinance at 5.25 percent.

State attorneys general are meeting today to discuss the deal. But some states have disagreed over what terms to offer the banks, including California Attorney General Kamala Harris who announced she would not agree to a settlement that would allow too few California homeowners to stay in their homes and let the banks off easy for their wrongdoings.

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  1. January 30, 2012 at 4:01 pm
  2. January 31, 2012 at 11:42 am

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