Bay Area homeowners who were victims of morgage fraud could see relief soon thanks to a $25 billion agreement reached between the nation's five largest lenders, the federal government and 49 state attorneys general.
The joint agreement, which aims to address mortgage loan servicing and foreclosure abuses, is the largest federal-state civil settlement ever reached, according to the U.S. Department of Justice.
California Attorney General Kamala Harris said this morning that California will receive up to $18 billion as part of the settlement to penalize robo-signing, or the practice of signing large numbers of documents without verifying their information, and other bank servicing and foreclosure misconduct.
"California families will finally see substantial relief after experiencing so much pain from the mortgage crisis," Harris said in a statement. "Hundreds of thousands of homeowners will directly benefit from this California commitment."
County-specific payments will be "based on the number of homeowners and the depth of the foreclosure crisis," according to Harris' office.
It is expected that homeowners in Contra Costa County will see $651,201,903 of the benefits over the commitment's three-year life. Alameda County homeowners can expect $757,072,633, while though Los Angeles, Riverside, San Bernadino, Sacramento and Stanislaus counties will see approximately $7.8 billion in relief. Specific breakdowns within each county were not available.
The group Alliance of Californians for Community Empowerment, or ACCE, which has staged anti-foreclosure events around the Bay Area, said today that the foreclosure deal is only a first step in improving the conditions for homeowners.
"This settlement is a down payment on the debt owed to homeowners and communities by the Wall Street gamblers that crashed our economy," ACCE member Vivian Richardson said. "It will bring relief to some of the victims of the fraud and abuse of Wall Street, but there is much more that needs to be done."
The group plans to work with the ReFund California Coalition and Harris to push for "real implementation and enforcement" of the settlement.
The agreement was reached with Bank of America Corp., Wells Fargo
& Co., JPMorgan Chase & Co., Citigroup Inc. and Ally Financial Inc. Oklahoma was the only state that didn't participate in the agreement and will not receive financial assistance.
The banks will put forth the billions of dollars to provide refinancing for borrowers in high-interest-rate mortgages, and reduce principal amounts for families who owe more than their homes are worth, among other relief.
President Obama, in remarks made this morning, said the settlement will "begin to turn the page on an era of recklessness that has left so much damage in its wake."
The housing bubble and ensuing economic downtown resulted in more than 4 million families losing their homes to foreclosure, the president said. The agreement not only provides some relief but also establishes "significant new homeowner protections," according to the Department of Justice.
The new agreement aims to prevent foreclosure abuses such as robo-signing, improper documentation and lost paperwork. New servicing standards will also make foreclosure a last resort by requiring loan servicers to evaluate other options and prevent a servicer from foreclosing on a homeowner being considered for a loan modification.
"These practices were plainly irresponsible. And we refused to let them go unanswered," Obama said. "We're going to make sure that the banks live up to their end of the bargain."