Federal and state officials announced Thursday a $26 billion settlement with five major banks over fraudulent foreclosure practices, such as submitting falsely notarized court documents and robo-signing foreclosure documents. At least $10 billion will be used to help borrowers reduce their loan balances and at least $3 billion will go toward loan modifications for borrowers whose mortgages are current but more than the homes are worth. According to U.S. Attorney General Eric Holder, multiple federal agencies, state attorneys general and banking regulators worked together to negotiate the deal.
“No compensation, no amount of money, no measure of justice is enough to make it right for a family who's had their piece of the American Dream wrongly taken from them. And no action, no matter how meaningful, is going to, by itself, entirely heal the housing market. But this settlement is a start,” said President Obama following the announcement. “And we're going to make sure that the banks live up to their end of the bargain. If they don’t, we've set up an independent inspector, a monitor, that has the power to make sure they pay exactly what they agreed to pay, plus a penalty if they fail to act in accordance with this agreement. So this will be a big help.”
The five banks involved are Wells Fargo, Bank of America, J.P. Morgan Chase, Ally Financial and Citigroup. The settlement also will ban them from simultaneously engaging in loan modification negotiations with borrowers and trying to foreclose on them. Four million Americans have been foreclosed upon since 2007. According to a report from the Center for Responsible Lending, the foreclosure rate for African-Americans between 2005 and 2008 was 7.90 percent, compared to 4.52 for whites.
NAACP Washington bureau chief Hilary Shelton told BET.com that the settlement could give Black borrowers a significant boost. In addition to providing a safe and secure place to raise families, homeownership is the number-one source of wealth development in Black communities and can be leveraged to help fund education and retirement.
“The disproportionate number of African-Americans who’ve lost homes because of the lenders’ reckless behavior has been disproportionate to African-American communities,” Shelton said. “The settlement begins to help make many families whole again by helping those underwater reset their loan principals, others to refinance their mortgages in a much more sustainable manner and put those harmed on the road again to homeownership.”
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(Photo: Alex Wong/Getty Images)
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