The US government has just announced a deal with five of the country’s biggest banks that will see homeowners given more than $25 billion as part of a settlement over foreclosure abuses.
The foreclosure settlement, which was agreed with the 49 out of 50 states as well as the government, comes following allegations that lenders were guilty of numerous abusive foreclosure practices during the height of the US housing collapse.
According to the provisions of the settlement, the money will be used to assist homeowners in reducing the amount owed on their mortgages, as well as compensate those who unfairly lost their homes to foreclosure, reported AFP.
US Attorney General Eric Holder said in a statement that the deal was a “step forward in righting the wrongs that caused the housing market collapse and America’s economic crisis.”
Observers say that the settlement will be warmly welcomed by millions of desperate Americans who have felt powerless as thousands of dollars were wiped off of the value of their homes during the property slump.
As for the banks involved – Ally Financial, Bank of America, Citibank, JPMorgan Chase and Wells Fargo – they will be hoping that the settlement will bring an end to months of finger-pointing and accusations, during which they were subject to numerous government probes and multiple lawsuits.
Even so, Attorney General Holder was quick to remind the public that the banks are not immune from prosecution as a result of the settlement.
“The deal does not prevent authorities from pursuing criminal enforcement actions,” he told reporters.
Many are hoping that now the deal has been done – following months of painstaking negotiations – the US economy as a whole may begin to see an improvement.
David Stevens, head of the Mortgage Bankers Association, told AFP that the agreement will play a vital role in stabilizing and bringing confidence back to the US housing market:
"With all the rumors and speculation surrounding these negotiations behind us, it is now imperative that policymakers, lenders, servicers and other stakeholders work together on policies and initiatives that will allow us to get the housing market on the road to recovery."
However, it’s worth noting that the settlement does not cover those mortgages backed by Fannie Mae and Freddie Mac – in other words, the vast majority of America’s home loans.
Some states are already beginning separate actions to try and assist homeowners with Fannie and Freddie-back mortgages. Kamala Harris, attorney general for California, has previously stated that she intends to make a deal with the two GSEs to secure principal reductions for homeowners in the Golden State.