A Mortgage Plan Gives Homeowners Bulk of the Benefits as announced by the Obama administration today. This deal was done with government authorities and five of the nation’s biggest banks have agreed to a $26 billion settlement that could provide relief to nearly two million current and former American homeowners harmed by the bursting of the housing bubble.
-Under the plan, federal officials said, about $5 billion would be cash payments to states and federal authorities, $17 billion would be earmarked for homeowner relief, roughly $3 billion would go for refinancing and a final $1 billion would be paid to the Federal Housing Administration.
-If nine other major mortgage servicers join the pact, a possibility that is now under discussion with the government, the total package could rise to $30 billion.
-The ultimate benefits provided to homeowners could equal a larger sum — $45 billion in the event all 14 major servicers participate.
– The aid is to be distributed over three years, but there are incentives for banks to provide the money in the next 12 months.
-Five mortgage servicers in the agreement — Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial — had already set aside most of the money.
-The amounts from individual banks were linked to their share of the servicing market. The biggest, Bank of America, would provide $11.8 billion, followed by $5.4 billion from Wells Fargo, $5.3 billion from JPMorgan Chase, $2.2 billion from Citigroup and $310 million from Ally. Bank of America would contribute an additional $1 billion for F.H.A. loans.
-Another 750,000 people who lost their homes to foreclosure from January 2008 to the end of 2011 will receive checks for about $2,000.
President Obama called it a landmark settlement that would “begin to turn the page on an era of recklessness.” He said the government will continue to pursue violations of law in the packaging and selling of risky mortgages that led to the crisis. “We’re going to keep at it until we hold those who broke the law fully accountable.”
In New York State, more than 46,000 borrowers will receive some form of benefit from the settlement, including an estimated 21,000 who are expected to owe less because their principal will be reduced, according to estimates by the Department of Housing and Urban Development.
Other multimillion-dollar settlements were announced on Thursday in connection with the years-long mortgage and foreclosure crisis:
¶ A mortgage servicing subsidiary of Bank of America agreed to settle Federal Trade Commission charges that it illegally assessed more than $36 million worth of fees against struggling homeowners, in violation of an earlier settlement with the F.T.C.
– The settlement money will be doled out under a formula that gives banks varying degrees of credit for different kinds of help. As a result, banks should be motivated to help harder-hit borrowers with homes worth far less than what they owe.
About one in five Americans with mortgages are underwater, which means they owe more than their home is worth. Collectively, their negative equity is almost $700 billion. On average, these homeowners are underwater by $50,000 each.
A recent estimate from the settlement negotiations put the average aid for homeowners at $20,000.