Government officials have struck a $25 billion settlement with five of the nation's largest lenders to address mortgage-servicing and foreclosure abuses committed by the companies.
The agreement, which the U.S. Justice Department announced Thursday after more than 16 months of negotiations involving all 50 U.S. states, federal authorities and the banks, provides financial relief for homeowners and toughens standards for how financial firms service mortgage loans. Joining the deal are the country's largest mortgage servicers: Ally Financial, Bank of America (BAC), Citigroup (C), JPMorgan Chase (JPM), and Wells Fargo (WFC).
Under the terms of the deal, mortgage servicers must allocate $20 billion to various types of mortgage relief for borrowers. At least $10 billion of that total will go toward reducing the principal for borrowers who are behind, or at risk of defaulting on, their loans at the time of the settlement and who owe more on their mortgages that their homes are worth. A minimum of $3 billion will go toward helping homeowners who also are "underwater," but current on their loans, refinance at lower interest rates. Up to $7 billion will be allocated toward offering other forms of aid, including forbearance of principal for unemployed borrowers, "short sales," and financial assistance for homeowners whose homes are foreclosed. In addition, loan servicers must pay $4.25 billion to the states and $750 million to the federal government.
For more: Banks in $25B deal to settle foreclosure abuses - CBS News
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