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.
· 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]