Government officials are set today to announce a record $26 billion settlement with the five biggest banks related to foreclosure abuses including "robo-signing" of documents.
The Department of Justice will hold a press conference at 10 a.m. to announce an agreement in principal. At least 42 states have agreed to sign onto the agreement. New York and California were among the last holdouts and it wasn't clear whether they will join or sue separately.
For the past year, President Obama has advocated for a mortgage relief plan with the five biggest mortgage servicers, Bank of America, JPMorgan Chase, Wells Fargo and Ally Financial, to settle an investigation of foreclosure abuses. Evidence of robo-signing foreclosure documents began to show in 2010 during a record national wave of foreclosed homes.
Earlier versions of the deal would give about 1 million U.S. homeowners who are underwater on their mortgages relief of as much as $20,000 in principal owed, and those who were foreclosed would receive several thousand dollars. The deal would apply to loans that were not sold to mortgage guarantors Fannie Mae and Freddie Mac.
Several states had previously agreed to a $19 billion settlement that would be used for national mortgage relief. The deal was reported to designate $17 billion to pay for principal reductions and other relief for up to one million borrowers behind in payments but owe more than their houses are currently worth, the New York Times reported.
However, those settlements would change depending on the number of homeowners between Jan. 1, 2008, and Dec. 31, 2011 who accepted the offer. Homeowners who participate in the settlementwould still have the right to sue the banks, according to Patrick Madigan, the Iowa assistant attorney general, the New York Times reported.
California and New York had expressed interest in joining the deal but were the last major holdouts. It was clear late Monday if the states would sign the settlement.
New York State's attorney general Eric Schneiderman and California's attorney general Kamala Harris had previously said the settlement terms were not adequate. Schneiderman reportedly hopes to investigate the root causes of the financial collapse and Harris wants stronger measures to benefit individual homeowners.
Homeowner advocates had also criticized the reported deal, saying it would provide little relief to the most troubled homeowners.
"What the country and the housing market needs is a bold and broad fix - not broad immunity for banks' criminal behavior," George Goehl, executive director of community organizing group National People's Action, said in a statement. "Any settlement that is just about robo-signing should only release claims on robo-signing and nothing more. It should fix the servicing system and it should provide real relief to struggling underwater homeowners and those who have lost their homes."
The housing market has remained in a slump across the nation. The S&P/Case-Shiller 20-city indexthrough November showed home values fell 3.7 percent from the previous year.
In January, the Federal Reserve's Federal Open Market Committee announced it expects to keep federal funds rate at zero to 1/4 percent at least through 2014, saying the housing sector remained depressed. The federal funds rate is the rate at which banks lend to each other overnight. LINK
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