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Government, banks file $25 billion foreclosure settlement in federal court

March 13, 2012 09:00AM

Joseph Smith, monitor for mortgage settlement

The $25 billion foreclosure settlement was formally filed in U.S. District Court in Washington D.C. today, the Wall Street Journal reported.

The settlement, between the government and five major mortgage companies — Ally Financial, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo — empowers Joseph Smith, formerly a financial regulator in North Carolina, to monitor banks’ compliance with the 42-page set of standards it creates. Smith will also have the power to levy fines against banks that do not comply with the new standards, the Journal said.

The intricate requirements set out in the agreement mean that about 500,000 borrowers, or 5 percent of American homeowners who are underwater, may be eligible for help under the deal, according to estimates from Ted Gayer, co-director at the Brookings Institution, a Washington, D.C.-based public policy think tank. [WSJ]