Foreclosure Abuse Heralds $26 Billion Settlement

Unprecedented $26 Billion settlement imposed on Five of the largest home lenders yesterday.

Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial were the five lenders named in the settlement. According to Inside Mortgage Finance, these five banks control 7.3 percent of all outstanding single-family mortgages. They will each pay $5 billion to the states and federal government, a portion of which will go to foreclosed homeowners and the balance to the states.

Under the settlement, $17 Billion will go to write down loans that are upside down for borrowers who do not have a government backed mortgage. $5 Billion will go to the states for foreclosure prevention initiatives and $3 Billion will go to reduce homeowner interest rates. The settlement will be dispersed over a three year period. However, bulk of the relief should be paid in the next 12 months.

Homeowners that were victims of the bank’s robo signing and other fraudulent activities which resulted in foreclosure will receive an estimated $2,000 without giving up their right for individually litigation.

While the settlement is appears to be good news, it could cause foreclosures to grow in the short term as lenders work to clear non-performing mortgages. Over the past year, many lenders slowed foreclosures while they were negotiating the terms of the settlement. Now that an agreement has been reached, banks could step up their foreclosure process.

California based Realty Trac estimates that there are 1.5 million homeowners not yet in foreclosure but at least 90 days past due on their mortgage. 1.9 million homes are in one stage or another of foreclosure and 11 million (1 in 5 homes) homeowners owe more than their home is worth. Realty Trac is predicting that foreclosures for 2012 will be up 25% over 2011.

Andee Allen is freelance writer, published writer, Business Consultant, and California Realtor/Investor (License #01854926). You are welcome to contact Andee at andeeallen@gmail.com or on her website http://www.andeeallen.com

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