A huge mortgage relief settlement between state and federal governments and mortgage providers will pay just a few thousand dollars to those that lost their homes to foreclosure since 2008. The settlement announced Thursday with Bank of America, JP Morgan Chase, Ally Financial, Citigroup, and Wells Fargo, valued at $26 billion overall, provides $17 billion in mortgage relief for people who are underwater on their homes. But 750,000 people who actually lost homes to foreclosure between 2008 and the end of 2011 get a one-time payout of $1,500 to $2,000, which for many will barely cover the cost of moving. One helpful proviso, however: Those who receive payouts don't forego the right to sue, as they often do in class-action settlements.
Those who managed to hang onto their homes, even if they're underwater, are going to benefit a lot more than those who lost theirs. The mortgage relief includes help paying down the principle on loans, and that could prove even more valuable than the dollar amount, USA Today reports:
The impact of the principal reduction is expected to go farther than the actual dollars. Servicers will get "credits" for writing down loans at varying stages of being under water. They'll get more credit for some writedowns than for others, officials said.
All told, the $26 billion deal could provide up to $40 billion in mortgage relief, one official estimated.