Foreclosure Settlement Removes Big Overhang for Banks

[Stocks-to-Watch]

Negotiators put a bow on a deal to settle claims of improper foreclosure practices by five big banks early Thursday, removing one of the big unknowns that had been hanging over the sector. The $26 billion settlement has been signed by 49 states, and the feds are inking a separate deal with Oklahoma, the Wall Street Journal reported. The deal could also help the housing market; about 1 million homeowners could get mortgage aid from the settlement, with $17 million going directly to borrowers, the LA Times reported.

Bank of America (BAC), Citigroup (C), JPMorgan Chase (JPM), Wells Fargo (WFC), and Ally Financial are all involved in the deal, which is the biggest government-industry settlement since the big tobacco settlement.

The Obama administration had trouble convincing attorneys general in New York, California and Florida to sign on; critics have claimed the settlement lets the banks off easy and precluded a full accounting of improper and possibly illegal foreclosures. President Obama announced in his State of the Union address that he would appoint a fraud unit to investigate mortgage origination and securitization abuses, which may have assuaged the critics’ concerns.



Original Article Source by Barrons.com