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Forty-nine of the 50 States AGs agreed to let five major banks off the hook - JP Morgan Chase, Bank of America, Citigroup, Wells Fargo, and Ally Financial (formerly GMAC). Oklahoma opted out, not from altruism. AG Scott Pruitt wants no banker penalties. Stealing is OK with him.
In exchange for robo-signing fraud, illegal fees, failure to honor previous settlements, and other servicer abuses, rogue bankers settled for $25 billion. It amounts to pennies on the dollar at most.
Homeowners may sue on their own. States get a fixed amount for legal aid services. All securitization claims, tax and insurance fraud ones, and others may still be investigated and prosecuted by individual AGs and the Residential Mortgage-Backed Securities Working Group (RMBS).
Set up by Obama's Financial Fraud Task Force, New York AG Eric Schneiderman is one of five co-chairs. Delaware, Missouri, Nevada and Arizona filed lawsuits. California AG Kamala Harris retained the right of state to sue under the state's False Claims Act. Massachusetts also has a foreclosure fraud suit pending.
Funds are apportioned as follows:
- $17 billion for troubled borrowers in the form of principal reduction credits;
- $3 billion toward underwater borrowers' refinancing; and
- $5 billion for cash payments to states to use for legal aid services, foreclosure mitigation programs, and fraud investigations;
In addition, Washington gets a small amount. Around 750,000 wrongfully foreclosed borrowers get checks from $1,800 - $2,000. It's pennies on the value of home equity stolen. On average, borrowers are underwater by $50,000 each. Collectively, their negative equity approximates $700 billion.
However, millions of underwater homeowners aren't helped, and statute of limitations absolution applies to amounts too large to ignore. Filings more than five years old are excluded, so defrauded homeowners beyond this timeline remain cheated out of luck.
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