The $25 billion mortgage fraud settlement to which Illinois is a party is nice, a housing advocate says, but it isn’t everything. Rob Palmer, policy director for Housing Action Illinois, says it’s good that the settlement requires lenders to try loan modification and refinancing before foreclosure. Certain homeowners also will be eligible for principle reduction, if their “underwater” status is what’s preventing them from refinancing.
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Much of the settlement will be principle reduction, which Palmer points out is money that the banks were likely to lose anyway, and Palmer says it doesn’t much help people who lost their homes to foreclosure in the early years of the housing crisis, and who are still carrying the economic wounds from that. They can get up to $2,000 each. The settlement is with banks that robo-signed foreclosure documents. The settlement applies only to robo-signing fraud; the banks are still subject to criminal and civil liability for anything else they’ve done wrong, if anything. Illinoisans will benefit to the tune of $1 billion of the $25 billion.