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Federal settlement to help consumers in wrongful foreclosures

The federal government has announced a settlement with major banks to compensate many consumers who have had their homes wrongfully foreclosed upon. The banks are to pay $8.5 billion to millions of homeowners, who lost their homes due to questionable practices, such as skipping required foreclosure steps and mishandling paperwork. This can greatly impact many consumers in Florida, which was one of the states hit the hardest by the housing market crash.

The settlement was originally begun as an enforcement action in 2011 as a result of complaints against banks and lenders for questionable and unfair foreclosure activities. The action has recently been revised to reach more of the affected homeowners and to reduce the cost and amount of time it was previously taking to close the individual cases.

The settlement covers millions of people in foreclosure during 2009 and 2010. A lighter offense, such as not allowing a homeowner some form of loan modification before beginning foreclosure, would bring a minimum compensation of $1,000; more serious incidences of foreclosure fraud such as seizing a family's home under unfair practices can result in a higher payout of up to $125,000.

Consumer advocates argue that this settlement is still unfair to those who have lost their homes under the above conditions. They say banks are getting off the hook too easily without paying as much as they should to people who have suffered the financial challenges that come with home repossession. However, proponents of the settlement and the banks involved say that this agreement will reach the affected individuals faster and more efficiently than the original 2011 agreements.

Source: MSN Money, "10 banks agree to pay $8.5B for foreclosure abuse," Daniel Wagner, Jan. 7, 2013

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