The U.S. Department of Justice has unveiled a $25 billion mortgage settlement with the nation’s five largest banks to resolve claims over faulty foreclosures and mortgage practices that have indebted and displaced homeowners and sunk the nation’s economy. The bulk of the mortgage settlement is expected to go to as many as one million homeowners in the form of reduced mortgage debts or refinancing at lower interest rates. Another 750,000 people who have lost homes to foreclosure will receive between $1,500 and $2,000. Attorney General Eric Holder helped announce the deal on Thursday.
Eric Holder: "We saw that, far too often, services pushed borrowers into foreclosure, even though federal regulations require the servicers to try other alternatives first. These failures didn’t just hurt borrowers who might have been able to afford modified mortgages, they fueled the downward spiral of our economy and of communities nationwide. They eroded faith in our financial system. And they punished American taxpayers, who have had to foot the bill for foreclosures that could have been avoided. With this settlement, we are recovering precious taxpayer resources."
While the deal is being described as a $25 billion settlement, the banks will only have to pay out a total of $5 billion in cash between them.