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U.S. states, banks reach 25 bln dollars settlement on foreclosure abuse

02-10-2012 09:13 BJT

WASHINGTON, Feb. 9 (Xinhua) -- Five big U.S. banks on Thursday reached a 25 billion dollars deal with the U.S. 49 states and the federal government to end a probe of abusive foreclosure practices stemming from the collapse of the housing bubble.

Federal and state officials announced the agreement, which concluded their efforts in the past 16 months to investigate bank foreclosure practices.

The "landmark" agreement will "begin to turn the page on an era of recklessness", said U.S. President Barack Obama, the deal won't heal the housing market, and "this settlement is a start."

Under the agreement, Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial are required to collectively dedicate 20 billion dollars in financial relief to borrowers and 5 billion dollars in cash to the federal and state government.

Together the five firms handle payments on 55 percent of all home loans outstanding, or about 27 million mortgages, according to Inside Mortgage Finance.

The financial relief comprised 10 billion dollars of principle reduction, 3 billion dollars of refinancing and 7 billion dollars in other forms such as forbearance of unemployed borrowers.

Figures provided by the government show that Bank of America will bear as much as 11.8 billion dollars, including a cash payment of 3.24 billion. The remaining allotments include 5.35 billion dollars for Wells Fargo, 5.29 billion dollars for JPMorgan Chase, 2.2 billion dollars for Citigroup and 310 million dollars for Ally Financial.

All but one of the 50 states agreed to the deal. Oklahoma chose to enter into a separate agreement worth 18.6 million dollars with the banks.

The settlement would apply only to privately held mortgages issued from 2008 through 2011. Banks own about half of all U.S. mortgages, roughly 30 million loans. Those owned by mortgage giants Fannie Mae and Freddie Mac are not covered by the deal.

Analysts said that the deal gave homeowners additional support to keep them repaying outstanding loans, which also help stabilize the housing market.

The joint federal-state agreement is part of enforcement efforts by Obama's Financial Fraud Enforcement task force. Obama announced to establish the interagency to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes in his recent State of the Union address.

Editor:Zhang Rui |Source: Xinhua

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