Settlement worth $26B reached for homeowners

After months of painstaking talks, government authorities and five of the nation’s biggest banks have agreed to a $26 billion settlement that could provide relief to nearly two million current and former American homeowners harmed by the bursting of the housing bubble, The New York Times reports. It is part of a broad national settlement aimed at halting the housing market’s downward slide and holding the banks accountable for foreclosure abuses. Under the plan—which federal officials are to outline in detail this morning—about $5 billion will go in cash payments to states and federal authorities, $17 billion will be earmarked for homeowner relief, roughly $3 billion will go for refinancing, and the remaining $1 billion will go to the Federal Housing Administration. Despite the billions earmarked in the accord, the aid will likely help a relatively small portion of the millions of borrowers who are delinquent and facing foreclosure. The success could depend in large part on how effectively the program is carried out, as earlier efforts by Washington, D.C., aimed at troubled borrowers helped far fewer than had been expected. The five mortgage servicers in the settlement—Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial—have largely set aside reserves for the expected cost of the settlement, and investors are likely to cheer its announcement because it removes one more legal worry for the industry, some analysts speculate. Read the full story here.