As briefly mentioned on this blog earlier this week, South Carolina is slated to receive nearly $34 million from some of the nation's most prominent banks, in part of what has been referred to as the largest joint state and federal settlement in U.S. history. The award is just a small portion of the total $25 billion settlement, which was brokered between five major American banks and 49 states in order to address fraud and other foreclosure abuses by the lenders. More details are now known about how the settlement will affect underwater borrowers in South Carolina.

Refinancing will be offered to borrowers who have kept up with payments and whose mortgages are worth more than their home. The process of identifying borrowers who qualify for refinancing is expected to take six to nine months. Additionally, $1.5 billion is set to be distributed among certain individuals across the country who lost their homes to foreclosure.

South Carolina's attorney general explained that the settlement protects consumers who are going through the foreclosure process and gives strict guidelines for how lenders should operate in the future. He added that the lenders will be forced to undertake a number of reforms, particularly in the way they deal with borrowers and process foreclosure documents. The banks will also have to stop improper fees and the practice of dual-track foreclosures, in which one arm of a lender works with the borrower on a mortgage modification while another part of the business plans for a foreclosure.

The state of South Carolina will receive $32.8 million in the form of loan reductions, modifications and refinances, with an additional $1 million being granted to the state's banking regulator to aid in foreclosure education and prevention.

The attorney general also encouraged borrowers who think they are eligible for a mortgage modification or refinancing to speak directly with the banks participating in the settlement: Bank of America, Citi, Chase, GMAC and Wells Fargo.

Source: Post and Courier, "S.C. To get nearly $34 million mortgage deal," John McDermott, Feb. 9, 2012