The U.S. government announced a deal on Thursday with the biggest U.S. banks to provide $26 billion in relief to distressed homeowners and states, as officials hold lenders responsible for taking illegal shortcuts during foreclosures and other mortgage paperwork.
The deal settles potential state charges about allegations of improper foreclosures based on "robosigning," seizures made without proper paperwork.
The nationwide settlement stems from abuses that occurred after the housing bubble burst. Many companies that process foreclosures failed to verify documents. Some employees signed papers they hadn't read or used fake signatures to speed foreclosures — an action known as robo-signing.
The deal would be the biggest involving a single industry since a 1998 multistate tobacco deal. It would force the five largest mortgage lenders to reduce loans for about 1 million households. The reduced loans would benefit homeowners who are behind on their payments and owe more than their homes are worth.
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