Five of the nation’s largest banks agreed to pay a $25 billion settlement to the federal government that will help to compensate former and current homeowners who were victims of widespread mortgage and foreclosure abuses. The settlement was announced today by Department of Justice and Department of Housing and Urban Development.
Nearly 2 million individuals who either lost their homes to foreclosure or struggle to hold on to their homes are eligible to get relief from the settlement. The banks that signed the agreement are Ally Financial (formerly GMAC), Bank of America, Citigroup, JP Morgan Chase and Wells Fargo. If those banks aren’t involved in your mortgage or weren’t involved in your foreclosure, you won’t be eligible to get relief from this settlement.
According to the terms of the agreement, $20 billion will go toward cutting loan balances and refinancing mortgages for consumers who owe more on their home than what it’s worth. Another $1.5 billion will help consumers whose homes were foreclosed from Jan. 1, 2008 , to Dec. 31, 2011. Consumers whose homes were foreclosed might qualify for at least $1,500 in compensation, several news publications reported.
The settlement is part of an investigation by federal and state officials into claims that mortgage servicers defrauded consumers. In the agreement, federal authorities cite several violations by mortgage servicers, including the use of fraudulent signatures in foreclosure proceedings and offering deceptive loan modifications.
Many of the allegations are problems that Consumers Digest reported in detail in “The Foreclosure Trap: How to Save Your Home” in the March/April 2011 issue.