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Politics & Government

$26 Billion Settlement Reached in Home Foreclosure Abuse Case

Homeowners affected by the fraudulent foreclosure practices may see their debt reduced, or receive checks.

State Attorney General Kamala Harris announced today that California will receive up to $18 billion as part of a settlement between 49 states and five banks over their foreclosure practices --  the largest settlement with an industry since the multistate deal with tobacco companies in 1998.

Negotiations had long been under way over the proposed foreclosure settlement, which is projected to be worth $26 billion, but California and New York had been holding out, as Oklahoma continues to do.

Harris said the $18 billion that California expects from the foreclosure settlement will include $3.92 billion for L.A. County, $1.59 billion for Riverside County; $1.13 billion for San Bernardino County; $820 million for Sacramento County and $368 million from Stanislaus County.

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Although the accord earmarks billions, only a relatively small number of delinquent borrowers facing foreclosure is expected to be helped by it. About a million borrowers who owe more than their homes are worth are expected to have their debt reduced or to get better terms, and some 750,000 people who

lost their homes between September 2008 and December 2011 are to receive $2,000 checks.

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Harris had called the settlement "insufficient" on grounds that the relief being offered would not allow enough California homeowners to stay in their homes while letting banks that had engaged in fraudulent practices off the hook too easily. New York Attorney General Eric Schneiderman also argued against too much immunity for banks.

But both Harris and Schneiderman agreed to improved terms this week. The settlement will be the biggest since the 1998 agreement with the tobacco industry which is projected to be worth more than $200 billion over 25 years.

"California families will finally see substantial relief after experiencing so much pain from the mortgage crisis,'' Harris said. “Hundreds of thousands of homeowners will directly benefit..."

Harris also planned to discuss the settlement at a news conference at the Ronald Reagan Building on Spring Street in downtown L.A. late this morning.

The settlement involves Wells Fargo, Bank of America, JPMorgan Chase, Ally Financial and Citigroup, all of which are said to have filed numerous foreclosures based on flawed and fraudulent documentation. The “robo-signing" violations that led to the settlement negotiations stemmed from the fact that banks had difficulty verifying ownership of mortgages because of the way in which loans had been bundled and sold to investors.

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