National Mortgage Settlement Finally Reached

foreclosure settlement
foreclosure settlement

WASHINGTON -- Forty-nine U.S. states have reached a $25 billion deal with the nation's biggest mortgage lenders over foreclosure abuses that occurred after the housing bubble burst.

Federal and state officials announced the deal Thursday. It is the biggest settlement involving a single industry since a 1998 multistate tobacco deal.

Under the agreement, five major banks -- Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial -- will reduce loans for nearly 1 million households. They will also send checks of $2,000 to about 750,000 Americans who were improperly foreclosed upon. The banks will have three years to fulfill the terms of the deal.

All but one of the 50 states agreed to the deal. Oklahoma, the lone holdout, will receive no money.

The conditions will be overseen by Joseph A. Smith Jr., North Carolina's banking commissioner. Lenders that violate the deal could face penalties of $1 million per violation and up to $5 million for repeat violators.

The settlement ends a painful chapter that emerged from the financial crisis, when home values sank and millions edged toward foreclosure. Many companies processed foreclosures without verifying documents. Some employees signed papers they hadn't read or used fake signatures to speed foreclosures -- an action known as robo-signing.