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Last month's proposed $25 billion mortgage settlement is one step closer to becoming official. Federal representatives have asked a judge to approve the settlement, which involves 49 states, Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial.
Approximately $20 billion will go to borrowers facing foreclosure. Most of the funds will be used to reduce principal and refinance loans. The remaining $5 billion will be dispersed by state governments to Americans who lost their homes to improper foreclosures between 2008 and 2011.
There isn't much difference between the official mortgage settlement and the one announced last month, reports the Associated Press. Critics remain concerned that few people will benefit, and those who do will not benefit fast enough.
Still, there are some provisions that will hopefully prevent the mortgage crisis from happening again. The banks have agreed to abandon the practice of robo-signing, and to maintain proper documentation. More importantly, they have agreed to revamp their loan modification procedures.
Consumers have often complained about the difficulty of receiving a loan modification. There is often no official process, and employees avoid their calls. The banks have agreed to end this practice, explains MSNBC.
Participating banks will no longer foreclose on homeowners being considered for a modification. They will also set official protocols and timelines for loan modifications, including an appeals procedure. Each bank will also create a single point of contact and hire adequate staff to handle any consumer questions.
At the very least, this portion of the mortgage settlement will prevent homeowners from falling prey to scams.