Graphic via the New York Times; click to expand!
In negotiations that lasted past midnight last night, five banks—Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally Financial—agreed to a $26B settlement designed to relieve 2M homeowners from mortgage debt. While some are saying the figure isn't nearly enough—and certainly not a Panacea, according to one Barclays analyst—others view the unprecedented deal as a step in the right direction. It's about "righting the wrongs that led to the housing market collapse,” said U.S. Attorney General Eric Holder. “With this settlement, we recover precious taxpayer resources, fix a broken system and lay a groundwork for a better future.” The chart above visually maps out the settlement, and here's a breakdown by the numbers:
Of the $26B:
· $5B paid to states and federal authorities
· $17B paid to homeowners
· $3B allocated for refinancing
· $1B paid to the Federal Housing Administration
Settlement will be distributed over three years and:
· 1M homeowners will have reduced mortgage debt or will able to refinance.
· 750K people who have lost their homes to foreclosure (Jan. 2008 through 2011) will receive $2K each.
· More than 46,000 people in New York State will benefit; of those, 21,000 will owe less on their homes.
· Average aid to homeowners: $20K.
General stats:
· 1 in 5 Americans are owe more on their homes than their homes are worth.
· Average of $50,000 underwater each.
· Collective negative equity equals $700B.
· Settlement Worth $26 Billion Reached for Homeowners [New York Times]
Given that the conservator of Fannie Mae and Freddie Mac, the 
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The Office of the Comptroller of the Currency, the Federal Reserve and the Office of Thrift Supervision released enforcement action against fourteen major bank/servicers in the form of consent orders. Bank of America , JP Morgan Chase , Ally Financial, Wells Fargo, SunTrust, Citibank, HSBC, MetLife, PNC, U.S. Bank, Aurora Bank, EverBank, OneWest Bank and Sovereign Bank will all be hit with no fewer than 16 new requirements for mortgage servicing and loss mitigation. They will also have to overhaul oversight of third-party vendors, including lawyers, who provide foreclosure services. "These reforms will not only fix the problems we found in foreclosure processing, but will also correct failures in governance and the loan modification process and address financial harm to borrowers," according to acting Comptroller of the Currency John Walsh. While there is no penalty involved in this action yet (penalties often follow enforcement actions), the Federal Reserve release says, "The Federal Reserve believes monetary sanctions in these cases are appropriate and plans to announce monetary penalties." The Fed regulates Ally Financial, SunTrust [STI Loading... () 
] and HSBC [HBC Loading... ()