Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial agreed to commit $26 billion this morning to assist homeowners’ foreclosures and underwater mortgages.
According to a news release by the California Attorney General office, up to $18 billion could go towards the homeowners in California, with $6.6 billion going towards Los Angeles, Riverside, and San Bernandino counties.
California’s portion of $26 billion national settlement is undetermined, but CA Attorney General Kamala Harris received additional support for the housing market to reach the $18 billion figure.
Chris Thornberg from Beacon Economics talked with Madeleine about the mortgage settlement.
“It’s a nice gesture, but realistically we’re sort of beyond the point where this is really going to do a lot to push the market in any particular direction. We’re over the hump. The majority of people who would be foreclosed on have already been foreclosed on," Thornberg said.
In return, banks would be immune from suits regarding robo-signing, "where mortgage companies signed false affidavits in order to speed up the foreclosure process," according to NPR's Yuki Noguchi.
"The banks made this problem for themselves by doing these rapid foreclosures. The foreclosures were legitimate, 99.9% [of homeowners] were foreclosed on for one reason, people weren't paying their mortgages. This has very little to do with the robo-signing scandal itself, but it was simply a point of leverage [by federal and state governments] in order to try to force more [from banks] for beleaguered homeowners," added Thornberg.
The settlement does not include mortgages issued by Freddie Mac and Fannie Mae, who are the largest mortgage lenders in California.