After a series of false alarms that a 50-state mortgage settlement on robosigning and certain other foreclosure abuse claims was imminent, a settlement between the banks and the states is at hand... finally.

49 states-- every state but Oklahoma-- have reached a deal with five banks-- Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial-- with major mortgage servicing operations and exposure to robo-signing and other foreclosure abuse claims.

The agreement settles state and federal investigations finding that the country’s five largest loan servicers routinely signed foreclosure related documents outside the presence of a notary public and without really knowing whether the facts they contained were correct. 

The settlement package which totals approximately $26 billion overall, will require the five banks to provide roughly $21.5 billion in relief to American homeowners.  The total amount of the package could increase to $40 billion if nine other banks choose to sign on to the deal, according to reports.

The package includes $17 billion in principal reduction and other forms of loan modification, $3 billion in refinancing subsidies to borrowers that are current on their loans but underwater on their mortgages, and $1.5 billion in the form of $2,000 checks to former homeowners who lost their homes in foreclosures infected by certain abuses, regardless of whether the abuses actually caused any financial harm.
 
The banks will pay additional money to states to help fund consumer protection and state foreclosure protection efforts.
 
The deal also includes an agreement to reforms to servicing standards, including a requirement to single point of contact for homeowners in danger of foreclosure, staffing levels and training requirements, provisions that set communication standards with borrowers, document execution standards, and limitations on certain fees.  Failure to comply with these standards will result in additional fines.

According to the Department of Justice, the settlement only releases the banks from civil liability from the states on robo-signing and other issues-- foreclosure practices, loan servicing, and origination of loans-- covered by the settlement.  It does not release any criminal liability or grant any criminal immunity, or provide releases from private lawsuits.  The settlement also does not settle lawsuits against MERS.
 
"While today’s agreement resolves certain civil claims based on mortgage loan servicing activities, it does not prevent state and federal authorities from pursuing criminal enforcement actions," said U.S. Attorney General Eric Holder.  "And it preserves extensive claims related to mortgage securitization activities, including the claims that will be the focus of the new Residential Mortgage-Backed Securities Working Group.  Furthermore, the agreement does not prevent any claims by any individual borrowers who wish to bring their own lawsuits."

"With this settlement, we aren't just holding mortgage servicers accountable for wrongs they committed," Holder said.  "We are using this opportunity to fix a broken system, and to lay the groundwork for a better future.  Our nation’s leading mortgage servicers will be required to follow a new set of standards, which will be overseen by an independent monitor – and will be enforceable in federal court."