Settlement sets price per foreclosed household – $2,000

A settlement announced last week among state and federal officials and the nation’s five largest banks was the largest joint state-federal settlement in history against an industry.

How, and when, the cash trickles down to individual households remains to be seen.

The settlement, which amounts to somewhere between $25 billion and $26 billion, is aimed at fixing some of the mortgage abuses over the last few years that caused people to lose their home.

So what does the settlement mean for consumers? Probably a better chance of a loan modification for those with underwater mortgages and approximately $2,000 for those who have already lost their homes.

Borrowers who have already lost their home to foreclosure may be eligible for payments. About $2,000 per household will be doled out to 750,000 borrowers found eligible. Payments will be paid over a three-year period.

Those who may be eligible for aid under the settlement include homeowners who are currently struggling to make their payments and need a loan modification, borrowers who are current on their payments but owe more on their house than it’s currently worth, or borrowers who may have already lost their home to foreclosure.

In the settlement, banks have agreed to write off a sum of the mortgage principal in select cases where homeowners are struggling to make payments. Homeowners will then be able to refinance and lower their monthly payments. Underwater borrowers also may receive aid, such as being able to refinance so they also can lower their monthly payments.

The banks participating in the settlement are Bank of America, JPMorgan Chase, Wells Fargo, Citi, and Ally/GMAC.