Feds reach $25 billion foreclosure settlement with five largest banks

After months of negotiations 49 states have agreed to a foreclosure settlement with the nation’s five largest lenders over their mishandling of foreclosure documents.

Under the agreement terms Bank of America, Wells Fargo, JPMorgan Chase, Ally Financial and Citigroup will write down the loans for close to 1 million homes. An additional 750,000 homeowners who were wrongfully foreclosed on will receive about $2,000 compensation, according to the Washington Post.

Many homeowners were subjected to fraudulent documents and refused mortgage modifications even though they qualified. Foreclosure attorneys helped some people avoid wrongful foreclosure, but millions of homeowners were not aware of the bank’s mistreatment of default paperwork.

All states with the exception of Oklahoma participated in the settlement.

The deal exempts lenders from future civil lawsuits by the states. Homeowners will still be allowed to pursue civil cases in court. The settlement allows states to pursue banks and mortgage servicers for criminal activity.

The settlement also changes lending standards and makes it easier for troubled homeowners to obtain a mortgage modification when in the past that was not possible with or without the assistance of a foreclosure lawyer.

Three billion dollars of the settlement will go to reducing the principles for underwater homeowners. An additional $7 billion will go to state foreclosure programs.

Though the people who have already lost their home won’t get their homes back they will get a small check. Anyone facing the prospect of losing their homes can consult with a foreclosure attorney to clarify their options.