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PHILADELPHIA (CBS) — A landmark $25 billion settlement with the nation’s top mortgage lenders was hailed by government officials Thursday as long-overdue relief for victims of foreclosure abuses. But consumer advocates countered that far too few people will benefit.
As 3 On Your Side Consumer Reporter Jim Donovan finds, the deal will reduce loans for only a fraction of those Americans who owe more than their homes are worth. It will also send checks to others who were improperly foreclosed upon. But the amounts are modest.
The five big banks that are involved in this multi-state settlement are Bank of America, JP Morgan Chase, Wells Fargo, Citigroup and Ally/GMAC. They had been charged with using predatory lending practices, lending money to borrowers who weren’t qualified, and then selling those mortgages to make profits.
“Under the terms of this settlement, America’s biggest banks, banks that were rescued by taxpayer dollars, will be required to right these wrongs,” said President Obama today.
The terms of the settlement between 49 states and the nation’s five biggest banks applies only to privately held mortgages issued from 2008 through 2011 and does not cover mortgages owned by Fannie Mae or Freddie Mac.
$17 billion of the settlement will be used to provide immediate aid to homeowners needing loan modifications. In some cases the banks will write off principal to help lower a homeowner’s monthly payment. $3 billion will be set aside for borrowers who are current on their loans, but owe more than their house is worth, to refinance at current low rates. Finally, checks of approximately $2,000 will be issued to borrowers who lost their homes to foreclosure between 2008 and 2011.READ MORE: Philadelphia Police Officer Has Strong Message For Son's Killers After Hyram Hill Killed In Targeted Shooting
HUD Secretary Shaun Donovan said, “This isn’t just about punishing the banks for their irresponsible behavior, it’s also about requiring them to help the people that they harmed by funding efforts to help homeowners stay in their homes.”
Under this deal the States have agreed not to pursue civil charges, but homeowners can still sue their banks in civil court on their own and Federal and State authorities can still pursue criminal charges. These banks have three years to fulfill the terms of the deal.
For more information on the settlement visit: http://www.nationalmortgagesettlement.com/
To see if your loan is owned by Fannie Mae or Freddie Mac, visit:Manor College Students Past, Present 'Very Angry And Frustrated' About Ukraine-Russia Tensions