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.
Bay Area homeowners who were victims of mortgage fraud could see relief thanks to a $25 billion agreement reached between the nation's five largest lenders, the federal government and 49 state attorneys general.
The agreement was reached with Bank of America Corp., Wells Fargo & Co., JPMorgan Chase & Co., Citigroup Inc. and Ally Financial Inc. The banks will put up billions of dollars to provide refinancing for borrowers in high-interest-rate mortgages, and reduce principal amounts for families who owe more than their homes are worth.
California Attorney General Kamala Harris announced Thursday that California will receive up to $18 billion as part of the settlement to penalize robo-signing, or the practice of signing large numbers of documents without verifying their information, and other bank servicing and foreclosure misconduct.
Harris said California families will see substantial relief and that hundreds of thousands of homeowners will have a direct benefit from the deal.
"This is an historic amount of relief for California homeowners, but it is one piece of a broader focus. We will continue our crackdown on mortgage fraud and quickly move to pass legislation that will simplify, reform and upgrade our broken mortgage system," Harris said.
County-specific payments will be "based on the number of homeowners and the depth of the foreclosure crisis," according to Harris' office.
It is expected that homeowners in Los Angeles, Riverside, San Bernadino, Sacramento and Stanislaus counties will see approximately $7.8 billion of the benefits over the commitment's three-year life. Specific numbers for the Bay Area were not immediately available.
President Obama, in remarks made this morning, said the settlement will "begin to turn the page on an era of recklessness that has left so much damage in its wake."
The housing bubble and ensuing economic downtown resulted in more than 4 million families losing their homes to foreclosure, the president said. The agreement not only provides some relief but also establishes "significant new homeowner protections," according to the Department of Justice.
The new agreement aims to prevent foreclosure abuses such as robo-signing, improper documentation and lost paperwork. New servicing standards will also make foreclosure a last resort by requiring loan servicers to evaluate other options and prevent a servicer from foreclosing on a homeowner being considered for a loan modification.
"These practices were plainly irresponsible. And we refused to let them go unanswered," Obama said. "We're going to make sure that the banks live up to their end of the bargain."
Here are the numbers for the banks impacted by the settlement. This is the place to start if you are a homeowner who needs help.
Bay City news contributed to this report.