$25 bn settlement with banks to provide relief to US homeowners

Philippine Times Friday 10th February, 2012

WASHINGTON- In a settlement that will bring relief to over a million house owners in the US, five of the biggest American banks accused of abusive mortgage practices have agreed to a $25 billion government settlement.

The deal was struck Thursday with the US government and most of the states.

The banks involved are Bank of America, Citigroup, Wells Fargo, JP Morgan Chase and Ally Financial.

The settlement brings to an end 16 months of protracted negotiations between the state attorneys general, regulators, federal officials and big banks to work out a settlement over allegations of improper foreclosures based on "robosigning", seizures made without proper paperwork.

The deal will provide $3billion relief to borrowers who are currently on repayments but are unable to refinance their loans as the capital exceeds the value of their homes.

It will also provide $17billion in principal reductions to those who are behind on their payments and at risk of default.

The deal is to be spread out over three years and also requires banks to extend $2,000 payments to borrowers who lost their homes to foreclosure.

The deal is the largest industry settlement since an agreement with tobacco companies in 1998.

President Barack Obama said that homeowners had not been treated fairly.

As the deal was struck, Obama told a news conference: "We have reached a landmark settlement with the nation's largest banks that will speed relief to the hardest hit homeowners in some of the most abusive practices of the mortgage industry and begin to turn the page on an era of recklessness that has left so much damage in its wake."