Saturday, February 11, 2012
In a historic settlement, five of America’s largest banks have agreed to pay $26 billion to settle a lawsuit charging poor servicing of mortgages as they went bad and illegal use of automatic signature devices on legal documents for the years 2008-11.
The settlement of the lawsuit, brought by states’ attorneys general in 2010, means many individuals in the midst of foreclosure proceedings will see the principal they owe on their mortgages shrink by as much as $20,000, reducing their monthly payments. The share of the settlement the banks will commit for principal reduction for struggling homeowners is $17 billion.
In addition, the banks agree to give individuals who have lost their jobs a one-year grace period to find a new job before beginning foreclosure proceedings. They also designated $3 billion of the overall settlement to help homeowners refinance their loans at a 5.25 percent interest rate. Some 750,000 people who have already lost their homes may get a check for $1,800 as compensation for the banks’ behavior.