A settlement has been reached between the banks and the government in the amount of $25 billion. This settlement is for the banks alleged fraudulent mortgage practices. There are some who feel that the settlement is not sufficient compensation.
Who will Benefit from this Settlement?
This settlement is the most significant that has been met between the federal and state governments and the banks. This money is meant to assist homeowners whose mortgage balance is higher than what their home is worth. However, this settlement will not be able to rescue the millions of homeowners who are suffering with financial difficulty due to the banks alleged deceptive mortgage practices. In fact, some critics believe that this settlement will scarcely cover the moving costs for homeowners who are losing or have already lost their homes. This enormous settlement between the state and federal governments and the mortgage providers will only give these homeowners a few thousand dollars each. The settlement pertains to individuals whose homes were foreclosed on from 2008 to the end of 2011.
Settlement Amount May Only Cover Moving Costs
The settlement is valued at $26 billion and provides mortgage relief for individuals who are suffering with financial difficulty. The amount of relief for these homeowners is $17 billion. The 750,000 homeowners who lost their homes because of foreclosure from 2008 to the latter part of 2011 will receive a one-time payment of $1,500 to $2,000. For many of these displaced homeowners, this may just about cover their moving costs.
Still Maintain Their Right to Sue
One positive aspect of the settlement for the homeowners affected is that receiving a payout will not forego their right to sue. This is good news for the affected homeowners because many times the right to sue is forfeited once they accept payment from a class-action settlement.
Principal Reduction vs. Monetary Payout
Individuals who were able to keep possession of their homes will benefit much more than those who did not. This relief includes helping them pay down the principal on their home loans. This could prove to be more valuable than the actual dollar amount, according to USA Today.
The reduction of the principal is expected to greatly affect the homeowner and benefit him much more than the actual monetary payout itself. The servicers will receive ‘credits’ for the writing down of loans at various stages of the collection process. The credit they receive will vary, according to officials. One official estimated that the $26 billion deal might provide homeowners with as much as $40 billion worth of mortgage relief.
