Feds Announce $25B Settlement Over Foreclosure Abuse

Feds announce $25B settlement over foreclosure abuse

Published February 09, 2012 | FoxNews.com

Federal officials announced Thursday that 49 states have accepted a $25 billion foreclosure-abuse settlement with the five largest mortgage lenders -- a deal that primarily helps underwater homeowners but pays just $2,000 to those already wrongly foreclosed upon.

The bulk of the deal requires the banks to reduce some loans and refinance mortgages for underwater borrowers. Oklahoma was the lone holdout to the agreement.

President Obama described the deal as a "landmark settlement" that would "begin to turn the page on an era of recklessness" while speeding relief to hard-hit homeowners.

It is the biggest settlement involving a single industry since a 1998 multistate tobacco deal. Under the agreement, five major banks -- Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial -- will reduce loans for nearly 1 million households.

Those who lost their homes to foreclosure are unlikely to get their homes back or benefit much financially from the settlement. For those improperly foreclosed upon, the banks will cough up checks of $2,000 to about 750,000 Americans. The banks will have three years to fulfill the terms of the deal.

Some critics say the proposed deal doesn't go far enough. They have argued for a thorough investigation of potentially illegal foreclosure practices before a settlement is hammered out.