Reported $25 Billion Deal Reached between Banks and AGs

As we mentioned yesterday, this $25 billion deal between the five largest banks in American and U.S. State Attorneys General nationwide will make it easier for those facing foreclosure to restructure their loans. The final draft of this agreement has been submitted for review.

This settlement would apply to privately-held mortgages that were issued between 2008-2011. It does not, however, apply to loans held by GSEs Fannie Mae or Freddie Mac. This means that nearly 750,000 homeowners could get the principal amount of their mortgages written down by $20,000.

Under the terms of this deal, $17 billion would be used toward reducing the principal that homeowners owe on their mortgages. Also, $5 billion would be placed in a reserve account for various state and federal programs. Part of that money would cover checks that will be sent to nearly 750,000 homeowners that were affected by deceptive foreclosure practices, amounting to $1,800 each. The final $3 billion would be dedicated toward the refinancing of homes nationwide at 5.25 percent. This proposal is expected to be adopted within a few weeks.

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