“Under the proposal, banks would be released from legal claims tied to servicing delinquent mortgages as well as certain mortgage-origination practices“
Banks, Officials Near Pact on Foreclosures
Bank representatives and government officials are pushing to put the finishing touches on a broad settlement of most state and federal investigations of alleged
foreclosure improprieties felonies that could force five large banks to make concessions worth roughly $19 billion.
Housing and Urban Development Secretary Shaun Donovan and state officials hope to reach a deal as soon as this week, though any agreement could be delayed by unresolved issues including the naming of a monitor to oversee the agreement.
The settlement would end months-long negotiations among federal officials, state attorneys general and the nation’s five largest mortgage banks: Ally Financial Inc., Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co. The talks center on the banks’ use of “robo-signing,” in which employees approved legal documents without proper review, and other
questionable felonious foreclosure practices. Representatives of the five banks declined to comment.
The value of the settlement could be as large as $25 billion if it includes California, which left the talks in September. California accounted for 13.1% of all mortgages outstanding at the end of September and 10.8% of all loans in foreclosure, according to the Mortgage Bankers Association. Without California, the value of the deal is likely to be roughly $19 billion, people familiar with the talks said. A spokesman for California Attorney General Kamala D. Harris declined to comment.
The dollar value of the deal would include the value of principal write-downs, interest-rate reductions and other benefits to homeowners as well as cash penalties.
The Obama administration has been pushing for a 50-state deal, but its efforts have run into opposition from labor unions and liberal groups that have warned that the proposed settlement is inadequate. Previous efforts by the administration to deal with the foreclosure crisis have been criticized as falling short of expectations.
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