Last month on our bankruptcy law blog, we discussed how the U.S. states’ debt settlement attorneys general were pursuing a $25 billion settlement agreement with at least five major lending institutions including Wells Fargo, JPMorgan Chase, Bank of America, Citibank and Ally Financial over fraudulent foreclosure practices between 2008 and 2011 that caused homeowners in California and throughout the entire U.S. to lose their homes.
State attorneys general have been requesting better guidelines regarding lenders’ foreclosure practices and more opportunities for struggling homeowners to participate in loan modification programs in an effort to prevent further abuses toward homeowners in the lending industry. After a month of negotiations, 49 state attorneys general and the five major banks finally settled on the $25 billion agreement last week. The entire state of California is expected to see a total of 72 percent of the settlement, which is about $18 billion.
It is estimated that struggling homeowners in San Diego County will receive about $1.5 billion in restitution and mortgage relief. Individuals in California who lost their homes to foreclosure by the five banks will receive an average of about $1,700 in compensation. It is believed that as many as 140,000 homeowners will receive restitution payments.
According to the agreement, about 28,000 homeowners in California will be able to refinance their mortgages that are currently underwater. In San Diego County, it is estimated that as many as 138,000 homeowners own mortgages that are currently underwater, meaning that they owe more on their mortgages than what their homes are currently valued at.
Unfortunately, many speculate that the majority of U.S. homeowners will not benefit from the settlement, but those who are on the brink of foreclosure may now have new opportunities to restructure their mortgages by reducing principal amounts so that they can better manage their monthly mortgage payments. Those who do end up losing their homes to foreclosure may at least be assured that banks are to follow stricter guidelines to make the process more legal and fair.

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