The $25 billion mortgage settlement with big banks means about 1$ billion in relief to Illinois homeowners.
People who owe more than their homes are worth and have fallen behind on payments may qualify for loan reductions, while other people who are underwater but current on their loans may be able to refinance. And people who lost their homes to foreclosure may be able to get cash payments.
Illinois attorney general Lisa Madigan helped negotiate the deal and spoke at a Washington, D.C., press conference announcing it.
"Today’s settlement should serve as a warning to financial institutions - there are consequences for engaging in practices that jeopardize the stability of our communities and our economy," Madigan said.
But whether this deal means a major boost for the housing market is still a question.
Amir Sufi is a finance professor at the University of Chicago Booth School of Business.
"It’s marginally going to have a positive impact," Sufi said. "I just don’t think it’s going to attack the really huge problem in a really major way."
That really huge problem, Sufi says, is the large number of homeowners who owe more than their homes are worth. The housing data firm CoreLogic says the total amount of negative equity in the U.S. as of last fall was $700 billion.
Illinois homeowners who are underwater on their loans say they’re hopeful the new mortgage settlement will help them. But many also say they’re beaten down after years of battling with banks.
Aimee Gendusa-English owns a home near Midway airport that’s now worth at least $50,000 less than she owes on the mortgage. She says she’s been trying to refinance her loan under a federal program for underwater borrowers. But she says her servicer keeps misunderstanding and bungling her request.
"I’m really glad to hear that anyone is going after the banks for any aspect of the wrongdoing that they engaged in," Gendusa-English said. "But as a consumer, it fills me with frustration because I feel like all these agencies are doing stuff but none of it helps me. I’m always the one who slips through the cracks."
Gendusa-English may not even qualify to refinance under the new agreement because she says her loan is held by Freddie Mac. Freddie Mac and Fannie Mae refinancings are covered under a separate federal program.