The five largest banks in the United States have settled with 49 of the 50 states to settle suits of improper, abusive, and negligent foreclosure practices.
The banks will pay a combined $26 billion into a settlement fund to compensate individuals who lost their homes or are currently underwater on their mortgages. A big chunk of the fund — $17 billion — will be used to lower the principal balance of homeowners who are behind on payments and owe far more than their home is worth.
While this is a good deal I can’t help but be a bit bothered that no compensation is paid to homeowners who are on time with their current mortgages (aside from part of the fund being used to help refinance those loans to low rates) or to homeowners who sold their homes as short sales or at serious losses out of their own pockets. In short, homeowners who did the right thing are getting the least (if any) help.
If you’re benefiting from the settlement, congratulations. Make sure you don’t blow the money you’ve been given. These articles should help guide you:
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Free From Broke was featured in the following carnivals:
Festival of Frugality # 322 – February 7th, 2012 Edition
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Carnival of Personal Finance #347, The Giants Edition | One Cent At A Time
Best of Money Carnival #141 – Super Bowl Edition
Yakezie Carnival – The Superbowl Clones Game | Steadfast Finances
I read on another blog that the average homeowner being bailed out will receive $20,000 in principle reduction. Now, remember many people upside down are in places like california with $500,000 loans and $150,000 upside down. Do you really think a $20,000 reduction will help each person in this situation that much?
26 billion sounds great, but I would be curious to see what the overall health of these banks is like. I’m sure the banks hired some fancy lobbyists to negotiate down to a number they’re OK with. Not sure why the gov. does penalize the crap out of them for making such bad loans.