NY, CA Sign Onto Bank Settlement

Four days after the initial deadline, California and New York have finally agreed to sign on to the multi-billion dollar settlement with the nation’s five largest banks after being among the deal’s harshest critics as it was negotiated, according to Bloomberg. With these two large states in on the agreement, the settlement, which would go toward homeowner relief programs, could be valued as high as $39 billion, continued Bloomberg. Still holding out are Nevada, Arizona, Massachusetts and Delaware.

The settlement is in response to banks signing off on foreclosures while many times not even even looking at the paperwork to make sure that the house indeed needed to be foreclosed upon. New York State had been engaged in litigation over these practices, though as part of the multi-state settlement, this suit would have needed to be dropped, a condition that caused New York to balk. As part of the new settlement, New York will be allowed to continue its lawsuit, said Bloomberg. However, it wasn’t a perfect win for prosecutors: another provision that the banks wanted, a release from future liability specifically pertaining to their improper foreclosure practices, known as “robo-signing”, went through, according to the New York Times. Investigations, however, are still able to be conducted around elements such as mortgage securitization and insurance and tax fraud.

About 1.75 million people are expected to get some manner of relief through the settlement, whether it be through reduction on their principal or through a direct $2,000 check if they lost their homes in foreclosure, according to the New York Times. Of this number, about 46,000 New York state borrowers will get some piece of the deal, continued the Times. However, those mortgages which were financed through Fannie Mae and Freddie Mac, accounting for half the mortgages in America, will not be included in this deal, sad the Times.