What the Deal Means

Article excerpt

Who will gain--and lose--from the $26 billion agreement between five mega-banks and the state attorneys general.

If you're one of the 750,000 people who lost a home through foreclosure between September 2008 and December 2011: You might qualify for a cash payment of up to $2,000. But don't be in a rush to spend that money--it could take as long as three years for homeowners to learn if they're even eligible to receive a payment.

If you're holding a mortgage that is under water: Roughly one in five mortgage holders in the U.S. owe more on their home than it is currently worth. Under this deal, the banks vow to help people who are up to date on their payments, but how much aid they'll receive is another question. On average, those with an underwater mortgage owe roughly $50,000 more than its resale value--yet the banks are expected to offer only about $20,000 in principal reductions to those who qualify.

If you're a would-be home buyer: There's good news in the deal for those looking to purchase a home. The banks have been more reluctant to foreclose in the 14 months the state attorneys general have been pursuing this case, so expect an influx of homes on the market as banks clear their backlogs of delinquent homeowners.

If you're a bank: The deal creates a more rigorous protocol the banks have agreed to follow when someone goes into default, making it harder for them to willy-nilly kick someone out of his home. …