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States nearing mortgage settlement with big banks

A foreclosure sign is seen in front of a bank-owned home for sale in Las Vegas, Nevada. States are reportedly about to announce a deal with banks over abusive foreclosure practices.

Jeremy Hobson: The Obama administration, and nearly every U.S. state are reportedly ready to settle for $26 billion with five of the country's largest banks. An announcement is expected today, perhaps bringing some closure to those who've been hurt by mishandled foreclosures.

Marketplace's David Gura reports from Washington.


David Gura: Four million households have been through foreclosure since 2007.  For some of them, this is good news.

Anthony Sanders teaches real estate finance at George Mason University.

Anthony Sanders: They’re going to receive a check -- it looks like it’s going to be between $1,500 and $2,000 per person. 

Those homeowners weren’t able to pay their mortgages.  This money will compensate them for the banks’ sloppiness during the foreclosure process.  But Sanders wonders how much of a difference $1,500 will really make to a family that’s lost its home.

Sanders: If you’re a Major League pitcher that’s won 21 games, and you lose your arm in an off-season boating accident, and you get a check for $1,500 from the insurance company, I sincerely doubt that’s going to make you feel any better.               

The settlement will also help others -- homeowners who are underwater, whose houses are worth less than what they owe.  There hasn’t been a settlement this big, between the government and industry, since the tobacco settlement in 1998.

In Washington, I'm David Gura, for Marketplace.

About the author

David Gura is a reporter for Marketplace, based in the Washington, D.C. bureau.

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