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Mortgage Servicing Settlement

On Feb. 9, 2012, the federal government and forty-nine state Attorneys General announced a $25 billion settlement agreement with five major banks, Ally/GMAC, Bank of America, Citi, JPMorgan Chase, and Wells Fargo, over mortgage servicing improprieties such as robo-signing loan documents. Details of the settlement and links to “help for borrowers” will be available at the National Mortgage Settlement’s website. According to the Bureau of Justice’s press release, at least $20 billion will be allocated to financial relief for borrowers. Certain people who sold their houses or were foreclosed on from 2008 through 2011 are entitled to additional cash payments from a $1.5 billion Borrower Payment Fund, part of an additional $5 billion cash payment to federal and state governments. During a radio interview, Attorney General Mike DeWine said Ohio will spend $75 million of its $335 million share to raze some of the 26,000+ abandoned houses in Cuyahoga County and the approximately 100,000 state-wide.

Skeptical commentators of the settlement — “a rounding error for the banks” — said the settlement would neither help individual homeowners ($2000 each for those wrongly foreclosed on) much, nor help improve the housing market.  A Bloomberg article predicted that house seizures resulting from the settlement would harm the still fragile housing markets in the short term.

According to AP, the settlement is the largest one against a single industry since the 1998 tobacco industry Master Settlement Agreement. The $25 billion settlement agreement includes five major banks (Ally/GMAC, Bank of America, Citi, JPMorgan Chase, and Wells Fargo) and relates to mortgage servicing improprieties such as robo-signing loan documents. Details of the settlement and links to "help for borrowers" will be available at the National Mortgage Settlement’s website. According to the Bureau of Justice’s press release, at least $20 billion will be allocated to financial relief for borrowers. Certain people who sold their houses or were foreclosed on from 2008 through 2011 are entitled to additional cash payments from a $1.5 billion Borrower Payment Fund, part of an additional $5 billion cash payment to federal and state governments. During a radio interview, Ohio Attorney General Mike DeWine said that $75 million of Ohio’s $335 million share to raze some of the 26,000+ abandoned houses in Cuyahoga County and the approximately 100,000 state-wide.

Federal Reserve Chairman Ben Bernanke gave a speech on the housing situation on Feb. 10, 2012, referencing a White Paper his agency prepared the previous month that tries to address the 33% decrease in home values since 2006 and the eleven million (25% of all) homeowners who are “underwater,” owing more than their homes are now worth.

Six Questions on Obama’s Refinance Plan (WSJ, 1/25/12): on the plan mentioned in the State of the Union address

San Francisco Audit Finds Foreclosures Riddled with Errors (NYT, 2/15/12)

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