Massive Deal Promises Reduced Mortgages For Some Local Residents

Local residents who are underwater on their home loans may get reprieve under a $25 billion deal announced today with the nation's biggest mortgage lenders.

Under the agreement, Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial will reduce loans for nearly 1 million households, including those in California. The banks will also send checks of $2,000 to about 750,000 Americans who were improperly foreclosed upon.

Forty-nine states, including California, have agreed to the deal, which is being touted as the largest settlement involving a single industry since the 1998 multistate tobacco deal. California has more than 2 million borrowers whose homes are worth less than their mortgages, the Associated Press reported today. Riverside County has been particularly hard hit by the crisis.

At press time, Oklahoma is the only state that has not agreed to participate in the deal, according to the Associated Press.

In addition to the payments and mortgage reductions, the deal promises to revamp mortgage-lending guidelines and make it easier for those at risk of foreclosure to make their payments and keep their homes, according to the Associated Press. However, those who lost their homes to foreclosure are unlikely to get their properties back.

The settlement only applies to privately held mortgages issued from 2008 through 2011. U.S. mortgages held by Fannie Mae and Freddie Mac are not covered by the deal, the Associated Press reported.

The deal also ends an investigation into Bank of America and Countrywide for inflating appraisals of loans from 2003 through most of 2009, the Associated Press reported. Bank of America acquired Countrywide in 2008.

The banks will have three years to fulfill the terms of the deal. Lenders that violate the agreement could face $1 million in penalties per violation and up to $5 million for repeat violators, according to the Associated Press.

The deal announced today follows promises made by President Obama during his State of the Union address to help U.S. homeowners. to read more about a deal he put on the table last month.

Some critics contend today's deal doesn't go far enough. They have argued for an investigation of potentially illegal foreclosure practices before a settlement is inked.