On February 9th, 2012, the United States Justice Department released the details of a $25 billion dollar settlement they reached with five major banks. The settlement occurred because the banks were accused of widespread use of robo-signing.
The settlement was the largest government industry settlement since the $250 billion Big Tobacco settlement in 1998 and the largest settlement in consumer real estate history. Robo-signing was a practice employed by banks to automate the processing and approval of foreclosure proceedings against homeowners.
In many cases, the banks were discovered to have processed thousands of foreclosures in a single day, all signed by one person. Now, almost nine months since the settlement date, over 80 percent of the settlement money has been used by banks to facilitate short sales.
This is not as surprising as many people might believe. Even before the settlement, short sales were becoming the preferred foreclosure alternative for both banks and homeowners. Once the settlement kicked in, the incentives didn’t change for either party, but the amount of money available did.
This has ultimately helped thousands of homeowners find dignified solutions to their financial problems.