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The federal government and 10 banks agreed to an $8.5 billion foreclosure settlement on Monday. The agreement puts to rest allegations that the banks didn't follow proper foreclosure procedures.
Following the financial crisis that began in 2008, millions of Americans lost their homes through foreclosure. Many of those people were actually current on their mortgage payments.
Regulators initially tried to introduce a system to review foreclosure files for defects, but this settlement will replace it. So if you dealt with foreclosure in 2009 or 2010, listen up because this deal may help you out.
As part of the agreement, banks will provide $3.3 billion in cash to 3.8 million mortgage borrowers who were foreclosed on. Ten banks have signed on: Aurora Bank, Bank of America, Citigroup, J.P. Morgan Chase, Wells Fargo, Sovereign Bank, MetLife, US Bank, SunTrust, and PNC, according to USA Today.
If you held a mortgage with any of those banks, you're entitled to some of that money. That applies even if your foreclosure was handled appropriately, or if you haven't filed a complaint. Why? Because most banks have determined that it's more cost-effective to compensate everyone rather than determine which foreclosed individuals suffered harm.
So what do you have to do to get a piece of the pie? Happily, nothing. Regulators will contact all affected individuals by the end of March.
Even if you still have a mortgage, you aren't being left out in the cold. As part of the foreclosure settlement, another $5.2 billion will go toward mortgage relief for people struggling to keep their homes.
A settlement like this means legal claims against the banks will be dropped in exchange for their compliance. But that only applies to claims that have already been brought.
If you're unsatisfied with the way your bank handled your mortgage, you can still bring a claim. But make sure you consult with a lawyer before taking on a big bank.
The awards that homeowners will get from the settlement will vary. Many who were charged improper fees will get a few hundred dollars, while others who lost their homes to foreclosure -- even though they were paid up -- may get as much as $125,000, according to CBS News.