‘Underwater’ mortgage aid part of big bank settlement

Up to one million at-risk, underwater borrowers may be eligible for a reduction on their mortgage principal if a settlement between big banks and government officials gets the final approval.

The mortgage aid is reportedly on the table as big banks and federal and state government officials are nearing an end to months of settlement talks stemming from foreclosure “robo-signing” abuses allegedly made by banks that caused many homeowners to lose their home.

“We’re very close to a settlement that would both fix the servicing problems, but also help over a million families around the country stay in their homes and get help,” said Shaun Donovan, U.S. Housing and Urban Development Secretary, during a recent forum at the Winter Meeting of the U.S. Conference of Mayors in Washington, D.C.

Under the proposed settlement, major lenders J.P. Morgan Chase, Bank of America, Wells Fargo, Citigroup, and Ally Financial would pay between $20 billion to $25 billion to settle alleged foreclosure abuses.

Donovan also said banks also would reduce the mortgage principal of up to one million borrowers by about $20,000 each. Furthermore, he noted that some families who were wrongly foreclosed upon may get compensated as a result of the settlement.