With court approval of bank deal, Connecticut homeowners can get help

Court approval of a $26 billion deal between the nation’s biggest banks and the Justice Department and all 50 states means Connecticut homeowners who may be eligible for federal aid can apply for a number of new programs for help.

Homeowners who were foreclosed upon by Ally Bank, Bank of America, Citbank, JPMorgan Chase and Wells Fargo can apply for a settlement amount of between $1,500 and $1,800. The banks will try to track down those who qualify for the money. But those who think the banks lack their most current contact information can fill out a “settlement borrowers form” provided by the Connecticut attorney general or contact the banks directly, http://www.ct.gov/ag/cwp/view.asp?a=2105&q=498966.

Perhaps the most important aspect of the deal, which a federal court approved last week, is the help it would give homeowners who have “underwater” mortgages serviced by the five banks. They could seek to reduce their loans’ principal to current market value, which could mean cuts of $100,000 or more.

Homeowners should apply for the mortgage reductions by contacting their servicers.

The banks have also agreed to new consumer-friendly practices for future loans.

The five banks who agreed to the settlement were charged with “robo-signing” foreclosure documents and other improper practices. Connecticut Attorney General George Jepsen was part of the settlement team.

Connecticut’s cut of the deal is more than $190 million.

About $27 million will go to Connecticut agencies that help troubled homeowners. Those include the Connecticut Department of Banking’s foreclosure prevention hotline, 1(877) 472-8313 and Department of Housing and Urban Affairs-approved housing counselors in the state.

Connecticut will receive the first installment of that money, about $2.2 million, soon, said Susan Kinsman, spokeswoman for the attorney general’s office.