HOT OFF THE PRESS

The recent agreement between the Obama Administration and five of the nation’s top banks is in place to help compensate the victims of the robo-signing crisis.

Robo-signing, a practice that has led to widespread foreclosures – many of which were unnecessary or executed too early – has gotten several U.S. banks in hot water. In fact, the first indictment of a top-level executive was handed down just a few weeks ago. She is now facing criminal charges and jail time.

The term “robo-signing” was coined to reflect the nature of how many of these foreclosures were executed: Automatically – often by a computer rather than an actual person – without the care and due diligence that could have kept many homeowners in their homes and out of foreclosure. Documents signed in this way were deemed fraudulent and more indictments may be in the works.

The repair efforts for the robo-signing crisis are geared toward helping foreclosure victims and punishing the banks, which will be footing the estimated $25 billion bill for the project. Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial will all share in the restitution efforts and, in exchange for their cooperation, will be immune from further prosecution.

The deal will have a positive impact mainly on those who were directly impacted by an unfair foreclosure: Namely, the robo-signing victims. Those who were foreclosed on between Jan. 1, 2008, and Dec. 31, 2011, should receive a letter in the mail sometime in the next several months with instructions on how to make a claim. Otherwise, victims may contact their Attorney General’s office. Claimants will receive their settlements at some point within the next three years (the amount of time officials estimate it will take to comb over all the documents again).

The new deal will also help existing homeowners in trouble, whether they are behind on their loans or struggling financially even though they are technically current on their loans. Loan modifications are possible, as well as refinancing, which can help distressed homeowners take advantage of current historically low interest rates and avoid foreclosure or bankruptcy.

All in all, it looks as though the robo-signing settlement will help to compensate victims of foreclosure for their unjust hardships, as well as make the mortgage climate in general more hospitable, which will hopefully contribute to the improvement of the housing market and the economy in general.