• 13
  • February
    2012

As or readers may have heard, five major banks recently agreed with federal officials and state attorneys general to pay a total of $25 billion to settle allegations of wrongdoing stemming from the robo-signing scandal. The controversy itself began in the fall of 2010, when major U.S. lenders suspended their foreclosure activities over a variety of potentially fraudulent practices regarding paperwork required for the foreclosure process.

In addition a borrower relief component, the agreement specifies various requirements for banks' documents used in foreclosure and bankruptcy proceedings, documentation of borrowers' account balances, and ensuring integrity of the chain of title.

The banks involved in the settlement are Bank of America, JPMorgan Chase, Wells Fargo, Ally Financial and Citigroup. While the details of the $25 billion agreement have not yet been released, it will include provisions regarding borrower relief.

According to sources, at least half of the $20 billion settlement must go towards reducing loan balances for homeowners at risk of foreclosure, and $3 billion of it must go toward allowing underwater homeowners who current on their loans to refinance.

The state of Tennessee's will reportedly receive an estimated $146 million of the settlement amount. On Thursday, state Attorney General Bob Cooper said Thursday the agreement, will offer significant relief to struggling homeowners. State banking commissioner Greg Gonzales, commenting on the new agreement, said its provisions are similar to the treatment that Tennesseans are likely to receive from smaller community lenders.

While the news is hopeful for struggling homeowners, some housing experts have warned that it may take months or even years to receive benefits from the settlement.

Source: Wall Street Journal, "What's Inside the $25 Billion Mortgage Settlement: An Early Look," Nick Timiraos, February 13, 2012.