Five of the nation's biggest banks and authorities have reached a $26 billion settlement to provide relief to nearly 2 million current and former American homeowners. After many months of talks and withdrawals from the negotiations by New York and California's attorney generals, the deal is designed to aid homeowners harmed by the bursting of the housing bubble through either the lowering of mortgage debt or favorable refinancing options. An additional 750,000 former homeowners will receive approximately $2,000 each for the banks' alleged foreclosure abuses that occurred from September 2008 through the end of 2011. Federal officials participating in the negotiations were hopeful that the eventual value for homeowners would be in excess of $39 billion.
Banks and mortgage servicers participating in the settlement include JPMorgan Chase, Wells Fargo, Citigroup, Ally Financial and Bank of America, which is expected to make the largest payment. Notably, the deal will not include mortgages owned by the government's housing finance agencies, Fannie Mae and Freddie Mac. This will result in the exclusion of half of the nation's mortgages.
The attorney generals of New York and California signed on to the deal as a result of recent concessions from the banks. The New York Attorney General initially opposed the agreement on the basis that it provided too broad of a release for the banks' past transgressions, which potentially impeded future investigations. Releases are expected to be limited to the foreclosure process, but do not include the packaging of risky mortgages, insurance, tax fraud or any criminal wrongdoing. ("States Negotiate $26 Billion Agreement For Homeowners," The New York Times, February 8, 2012).