New Bank Settlement To Benefit DC Short Sales

New deal announced Monday, provides an additional $8.58 billion from banks to settle claims that they wrongfully foreclosed on millions of homeowners and will directly benefit DC short sales. The settlement is in addition to a $25 billion settlement agreement last year.

The agreement seeks to compensate hundreds of thousands of Americans whose homes were improperly seized because of abuses such as “robo-signing,” forged documents and other violations of foreclosure law.
In exchange, the settlement will also help eliminate huge potential liabilities for the banks. Some consumer advocates complain that the agreement is too low a price for the forgiveness of the full liability for all of the improper foreclosures that victimized many families and neighborhoods across the nation. The deal won’t fully compensate homeowners but caps liability at a total number that’s less than what the banks expected to pay; however, the full extent of the problem will never be known.

The settlement prematurely puts an end to an independent review of loan files and cuts short a full accounting of the problem. Still there is a benefit of saving the large expense of the review and moving in a new direction that ensures that the homeowners affected will benefit, and benefit more quickly.

Of the $8.58 billion, $3.3 billion will be paid to homeowners to closed settle the independent review and will be paid by banks, including Wells Fargo, Bank of America, JP Morgan Chase, Citigroup, MetLife Bank, PNC Financial Services, Sovereign, SunTrust, U.S. Bank and Aurora. The remaining $5.2 billion will be used to reduce mortgage bills and forgive outstanding principal on properties sold for less than the amount owed (DC short sales).

It is estimated that a total of 3.8 million people are eligible for some compensation under the agreement. The payments could range from <$1,000 to $125,000. Lower compensation will be offered to homeowners wrongly denied a loan modification, while people who lost their home to improper foreclosure will be qualify for the largest payments.

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