Last week, the federal government announced a $26 billion settlement with the banks responsible for the 2008 mortgage collapse. The deal seeks to provide relief to millions of homeowners who are at risk of losing their homes.
The banks-Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial-must provide this compensation for their roles in the real estate mega-fraud known as “robo-signing” and other abusive practices.
Under the settlement, achieved thanks to the insistence of New York Attorney General Eric Schneiderman, New York will receive $790 million. The attorney general will distribute $136 million in upcoming weeks to nonprofits that offer legal advice to homeowners on the brink of foreclosure. This is a much-needed monetary injection given recent cuts in state funding that have put the operations of legal aid groups in jeopardy.
The balance, $654 million, will be earmarked for refinance programs, loan modifications and payments to victims of wrongful foreclosures. The banks will administer the money, and have six to nine months to determine who is eligible for compensation, and up to three years to meet their obligations.
Although Fannie Mae and Freddie Mac manage $30 million in mortgages, their loans are not covered by this settlement.
This settlement is only a light scolding for the large banks, whose greed ruined the finances of almost eight million families in the United States.
In New York, one out of every 10 families has been affected by the predatory practices of these banks. The majority of those who have lost or are at risk of losing their homes are African American or Hispanic, as El Diario highlighted in a series about foreclosures in Bushwick, Brooklyn.
Families who are at risk of foreclosure must seek legal advice and contact their banks to find out whether they’re eligible for compensation. Unfortunately, we must emphasize that this settlement will only provide relief to a small segment of the millions who have been affected.
It is critical that the Obama administration assign resources needed for the recently announced working group to investigate mortgage-backed securities, led by Schneiderman, to fully do its work. The only way to obtain some measure of justice is to continue investigating deceptive practices by financial firms.