Thursday, February 09, 2012

$26 billion mortgage industry settlement

State Attorneys General from across the US, including Martha Coakley of Massachusetts, have reached a $26 billion settlement with five of the country's largest lenders (Bank of America, JP Morgan Chase, Citigroup, Ally Financial and Wells Fargo).  Not surprisingly the deal is incredibly complex but according to this article in USA Today, the largest chunk of money, $17 billion, will go to 1 million underwater borrowers who now face foreclosure.  The rationale behind this portion of the settlement is that if these homeowners are able to avoid foreclosure, there will be fewer low-value homes on the market which will boost the entire housing sector. 

Skeptics point to the fact that $17 billion is a small amount compared to the total amount owed in underwater loans.  It is estimated that Americans collectively owe $700 billion more than their houses are worth.  If you are underwater but have been keeping up with your payments, you probably won't qualify for any of this assistance.

As mentioned above, it also appears that Massachusetts will participate in this settlement.  According to this story on, Attorney General Coakley finally agreed to this deal once she received assurances that she can continue to pursue her existing claim, filed last December, against MERS and against these five lenders for conducting foreclosures without first owning the mortgage being foreclosed. 

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