US Announces $25B Settlement Following Probe Into Abusive Foreclosure Practices

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The Department of Justice Thursday released details of a deal between the federal government and the five largest US mortgage lenders following a probe into possible abusive foreclosure practices which began in October of last year.

Already totaling more than $25 billion, the agreement is broken down as follows:

$17 billion for "mortgage debt forgiveness," forbearance, short sales and other homeowner assistance;
$5 billion to states for foreclosure-prevention initiatives;
$3 billion in refinancing to reduce homeowners' interest rates, and
$1.5 billion to homeowners harmed by botched foreclosures.

In an early-afternoon press conference, President Obama said the probe is set to continue and that these banks will need to "right these wrongs." As a Bloomberg article pointed out, several officials have said the bill will likely hit $26 billion over just the next few days.

BofA's (NYSE: BAC) commitment in the deal sits at $11.8 billion, exposure at JPMorgan (NYSE: JPM) and Wells Fargo (NYSE: WFC) each is $5.3 billion, Citi's (NYSE: C) commitment is $2.2 billion, and Ally Financial is said to have $310 million of the total.

Additionally, the Fed also announced sanctions against the above banks related to the settlement. JPMorgan will owe $275 million, Ally will owe $207 million, and BofA will owe $175.5 million.

Stocks pushed well into positive territory as details of the deal became more clear. The Dow Jones is now up 31 points, the Nasdaq is up 13, and the S&P 500 is up 4.

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