States, Banks Agree to Foreclosure Settlement

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Five of the nation's biggest mortgage lenders will pay $25 billion to settle charges over foreclosure abuses that occurred after the housing bubble burst.

Federal officials and leaders from 49 states announced the agreement Thursday at a news conference. Oklahoma announced a separate deal with the five banks.

The deal is the largest settlement involving a single industry since a 1998 multistate tobacco deal.

Bank of America, J.P. Morgan Chase, Wells Fargo, Citigroup, and Ally Financial will reduce loans for nearly one million households at risk of foreclosure.

They will also send checks in the amount of $2,000 each to 750,000 Americans whose homes were improperly foreclosed.

The banks will have three years to fulfill the terms of the deal, which still needs final approval by a federal judge.

"There were many small wrongs that were done here," U.S. Housing and Urban Development Secretary Shaun Donovan said. "This does not resolve everything. We will be aggressive about going after claims elsewhere."

Many companies processed foreclosures without verifying documents. Some employees signed papers they hadn't read or faked signatures to speed up the foreclosures.

The states say they will not pursue civil charges related to these types of abuses. Homeowners, however, can still sue their lenders in civil court.

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