Big mortgage settlement fails to help millions of homeowners

by Cora Currier (published here by consent of ProPublica.)

The Obama administration is billing today”s $25 billion agreement between mo

st states and five banks that engaged in flawed or deceptive practices as a big win for struggling homeowners.

Most of the money in the settlement isn”t a penalty, or a fine levied on the banks. Instead, the biggest slice of the settlement will be money banks put toward principal reduction — reducing the amount owed by struggling or underwater borrowers. (Banks will also put smaller amounts toward refinancing and other ways of helping people get back in control of spiraling debt.)

Getting a break on their mortgages could help the millions of homeowners who owe more on their home than it is worth. But many of them won”t qualify — thanks to government-owned Fannie Mae and Freddie Mac. [Continue reading…]