Attorney General Kamala Harris today announced a settlement with five banks that will net Californians $18 billion in mortgage relief including $12 billion in principal reductions.
The banks included in the settlement are Bank of America, JP Morgan Chase, Ally, Citibank, and Wells Fargo. For their part, the banks bought themselves protection from litigation regarding the practices of signing “foreclosure related documents outside the presence of a notary public and without really knowing whether the facts they contained were correct. Both of these practices violate the law,” according to a federal Web site explaining the deal.
The settlement includes 49 states as well as the federal government. Harris was instrumental in getting the deal done, holding out until she could guarantee greater protections for California where there are more foreclosures than in any other state.
There are also nearly two million homes in California that are underwater, meaning that more is owed on their mortgages than they are worth. That is why the concession by the banks to grant principal reductions was crucial. Moreover, Harris pointed out during a press conference in Los Angeles this morning, there is no judicial means of forcing banks to grant principal reductions.
Of the money set aside for California, $850 will be dedicated to helping homeowners who are underwater but current on their payments to refinance. The banks will also create a $279 million restitution fund for homeowners who were foreclosed on.
Harris said that individuals will still be able to bring lawsuits against the banks and that her office is also conducting several investigations. “We brought $18 million to California, and we did it in a way that did not give a blank check of immunity to the banks,” she said.
The Attorney General’s Office has set up a FAQs page on its Web site to help borrowers find out if they may be eligible for relief.