It is a sadly familiar story…

In 2008, the nation’s housing bubble burst.  Ordinary folks lost their homes to foreclosure while big banks made profits on their pain.

But now, maybe, a little pay back is in store.

Federal authorities and representatives from Bank of America, Citi, JP Morgan Chase, Wells Fargo, and Ally/GMAC today agreed to a settlement regarding foreclosure fraud. The banks will pay $26 billion in total, money which government officials hope will help homeowners in trouble.

Maryland Attorney General Douglas F. Gansler announced that Maryland will receive about $1 billion in settlement funds, which will be dispersed as follows:

Specifically, the funds will be used to make payments to borrowers who were victims of illegal practices and to offer loan modifications, refinancing, counseling, and housing services to Maryland residents.

Attorney General Gansler stressed that:

The settlement does not release the banks from criminal liability. It does not prevent individuals from bringing their own claims. And it will not stop our office from pursuing the banks over misconduct in the securitization of mortgages, fair lending violations, or other fraud. People should expect to see further action.

Is this a good first step? Do you think the various state-level programs begging established might fare better than previous efforts aimed at helping victims of lending fraud? If not, what can be done to help troubled borrowers and bring those who violated the law to justice?