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$25 billion foreclosure settlement approved by federal judge


Five banks and federal officials have reached a $26 billion settlement that could help the over 2 million homeowners effected by the housing bubble crash. (Photo by Spencer Platt/Getty Images)


Spencer Platt

A federal judge has approved a $25 billion settlement between the nation's five largest mortgage lenders and the attorneys general of 49 states and the District of Columbia over abuses in foreclosure processing.

U.S. District Judge Rosemary Collyer signed off on the landmark deal on Wednesday, according to court documents, nearly two months after it was announced with great fanfare at the Jutice Department. Her approval became public Thursday afternoon, the Washington Post reported.

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The approval clears the way for the banks to compensate homeowners who may have been impacted by the so-called robo-signing scandal, in which bank employees signed hundreds of documents a day attesting to facts that they had little or no knowledge of, CNN reported.

The five banks: Bank of America, Citigroup, JPMorgan Chase, Wells Fargo and Ally Financial agreed to pay around $5 billion in cash to the federal and state governments under the deal, Reuters reported.

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They also agreed to cut mortgage debt amounts and restructure troubled loans from the pool of loans they service to meet the rest of their monetary obligations under the settlement, according to Reuters.

The judge's approval capped more than a year of hard negotiations between the banks, the states attorneys general and the U.S. Department of Housing and Urban Development, according to CNN.

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The banks are now immune from future claims by the government as long as they abide by the settlement, although homeowners may still pursue individual claims. States can also press criminal charges if merited, CNN reported.