Five of the largest banks in the United States and government
authorities in all 50 states have reached an agreement about how to
settle a massive investigation into flawed and fraudulent
According to reports from
The New York Times
and other sources, Ally Financial, Bank of America (
), Citigroup (
), JPMorgan Chase (
) and Wells Fargo (
) agreed to settle a series of lawsuits from both the federal
government and the states. The lawsuits covered a wide range of
violations, including the use of "robo-signing" to speed the
foreclosure process in often fraudulent ways.
Think Progress' Pat Garofalo lays out the basic elements of
, laying out how much money the banks will pay up ($26 billion),
how much of it will go to help beleaguered homeowners ($17 billion)
and the number of homeowners who will be aided by the deal (between
1 and 2 million).
Attorney General Eric Schneiderman will continue to press his
suit against Bank of America, JPMorgan Chase and Wells Fargo over
deception and illegal actions in the
Electronic Registration System database. MERS, as it's usually
called, is the central repository of data for every mortgage in the
United States; in the last few years, nearly all mortgages in the
country were registered with MERS rather than with county offices,
saving lenders and borrowers millions of dollars in fees but
depriving local governments of vital revenue.
that the banks wanted the MERS lawsuit to be dropped along
with the other investigations, but they were apparently thwarted in
that effort. In addition, individual lawsuits concerning mortgage
and foreclosure fraud will still be allowed to proceed.
Bank of America ticked up slightly following the news, opening
almost 2 percent higher before retreating slightly. Citi, JPMorgan
and Wells Fargo all slid by about half a percent by noon in New
The $26 billion represents a significant settlement, but it clearly
won't stagger the banks too much. Together, the four banks
mentioned above took in a total
of $47.6 billion in 2011. It's not as if the banks will be paying
the settlements out of pure profits, either; they've all set aside
a fair amount of
to pay for their mistakes. Still it's telling that the banks will
be paying just about half of their annual profits to walk away from
the foreclosure mess.
Meanwhile, Housing and Urban Development Secretary Shaun Donovan
has said that the housing market in the US remains depressed
held by US homeowners. To be perfectly clear - that's $700 billion
that homeowners owe, mostly to the banks above, over and above the
of their house.
The $26 billion settlement helps. But it's a long way from healing
the grievous wounds left by the crisis and the fraud.