Big Banks and AGs Reportedly Reach $25 Billion Settlement to Revamp Mortgage Practices

Five major U.S. banks, Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial, have reportedly reached a $25 billion settlement with U.S. state attorneys general nationwide to revamp their mortgage lending guidelines and make it easier for those at risk of foreclosure to restructure their loans. A draft of the settlement between the banks and the AGs has been sent for review. The settlement would apply to privately-held mortgages issued between 2008-2011, not those held by the government-sponsored enterprises (GSEs), Fannie Mae or Freddie Mac. As part of the deal, nearly 750,000 U.S. homeowners could get the principal amount of their mortgages written down by an average of $20,000. Democratic AGs have already met to discuss the deal Shaun Donovan, Secretary with the U.S. Department of Housing & Urban Development (HUD). Under the terms of the proposed deal: ►$17 billion would be used toward reducing the principal that struggling homeowners owe on their mortgages. ►Approximately $5 billion would be placed in a reserve account for various state and federal programs; a portion of that money would cover checks in the amount of $1,800 each that would be sent to nearly 750,000 homeowners affected by deceptive foreclosure practices. ►Approximately $3 billion would be dedicated toward the refinance of homes nationwide at 5.25 percent. The proposal could be adopted within weeks.