Los Angeles Times building in downtown Los Angeles, California (Photo credit: Wikipedia)

The federal court is finally moving in the right direction with a $25-billion nationwide settlement over alleged foreclosure abuses of five major U.S. banking firms. Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc., and Ally Financial Inc. were the banks charged with wrongdoing which included such things as robo-signing, botching, losing, and improperly processing paperwork. In many cases, banks were also accused of lying to customers.

The settlement includes monitoring banks and imposing penalties of up to $1 million for first violations and up to $5 million for second infractions when banks fail to comply with specific terms.

Borrowers will receive forgiveness of debt stemming from missed payments and penalties, plus banks are asked to allow homeowners to sell their homes for less than the mortgage amount.

It all sounds like a great solution, however every borrower who needs help will not qualify. The solution applies to those who have a mortgage with the group of five banks and only if their loan is not backed by government controlled financing firms like Fannie Mae or Freddie Mac. So, because of the strict criteria for eligibility, only 5% of the total number of people who have underwater mortgages will qualify for this type of help, leaving the majority of underwater homeowners drowning in a sea of debt.

As an incentive to do the right thing, banks will be given credit (points) for serving underwater borrowers.

The Los Angeles Times has an excellent article written by By Jim Puzzanghera and E. Scott Reckard, Los Angeles Times, March 12, 2012 which offers more details about the issue of banks and how the settlement outlines new mortgage servicing standards. To read their article titled Deeply Underwater Homeowners to Get Most Aid From Foreclosure Deal, click here.

Related articles

• Mortgage Debt Settlement: is it Possible? (mycreditgroup, HubPages)
• Breaking Down the Mortgage Settlement: How Far Does $26 Billion Go? (propublica.org)
• Details of $26B mortgage settlement now made public (agbeat.com)
• Housing settlement details filed in court (money.cnn.com)
• Karma Is A Beyotch… And An Expensive One At That! Banks To Pay Homeowners $25 Billi Over Bad Mortgage Shenanigans (bossip.com)

For more information about real estate, visit www.BertrandRealty.com.