Our Minneapolis readers may have heard about the recent announcement by federal officials that a $25 billion fraud settlement with five of the nation's largest mortgage lenders has been reached.

The settlement, which has the goal of reimbursing some homeowners and changing industry practices, stems from allegations that mortgage lenders failed to properly verify foreclosure documents and inadequately responded to borrowers who asked for help. In some cases, employees signed papers which they hadn't reviewed or used false signatures in order to speed up the process.

According to Attorney General Lori Swanson, at least 25,000 homeowners in Minnesota will be affected by the settlement. The state of Minnesota has access to roughly $280 million of the settlement, including as much as $113 million in monetary and refinancing relief and up to $167 million in principal reduction and other relief for homeowners.

Wells Fargo, Minnesota's largest mortgage lender, plans on contributing $5.3 billion to the settlement, including roughly $3.4 billion to assist customer in modifying their mortgages. The four other banks participating in the settlement are Bank of America, J.P. Morgan Chase, Citigroup and Ally Financial. The settlement only applies to privately funded mortgage, though, so government-guaranteed mortgages through Fannie Mae and Freddie Mac are not included.

Affected borrowers may file a claim for monetary relief if they harmed by bank practices. Some borrowers who lost their homes in foreclosure may be able to get a $2,000 refund. There is also a refinance benefit which allows borrowers to refinance at a lower interest rate if they are current on their mortgage and have had no delinquencies in the last 12 months.

Housing experts have warned, however, that it may take months or even years for individual homeowners to receive benefits from the settlement.

Source: Star Tribune, "Minn. gets $280M for mortgage aid," Jim Buchta and Pam Louwagie, February 9, 2012.