With a deadline looming today for state officials to sign onto a
landmark multibillion-dollar settlement to address foreclosure
abuses, the Obama administration is close to winning support from
crucial states that would significantly expand the breadth of the
deal. The biggest remaining holdout, California, has returned to
the negotiating table after a four-month absence, a change of
heart that could increase the pot for mortgage relief nationwide
to $25 billion from $19 billion. Another important potential
backer, Attorney General Eric T. Schneiderman of New York, has
also signaled that he sees progress on provisions that prevented
him from supporting it in the past. The potential support from
California and New York comes in exchange for tightening
provisions of the settlement to preserve the right to investigate
past misdeeds by the banks, and stepping up oversight to ensure
that the financial institutions live up to the deal and
distribute the money to the hardest-hit homeowners.
The settlement would require banks to provide billions of dollars
in aid to homeowners who have lost their homes to foreclosure or
who are still at risk, after years of failed attempts by the
White House and other government officials to alter the behavior
of the biggest banks. The banks — led by the five biggest
mortgage servicers, Bank of America, JPMorgan Chase, Wells Fargo,
Citigroup and Ally Financial — want to settle an investigation
into abuses set off in 2010 by evidence that they foreclosed on
borrowers with only a cursory examination of the relevant
documents, a practice known as robo-signing. Four million
families have lost their homes to foreclosure since the beginning
of 2007. If banks fall short of the multibillion-dollar
benchmarks set out for principal reduction and other benefits for
homeowners, they will have to pay the difference plus a penalty
of up to 40% directly to the federal government, according to Mr.
Madigan. The settlement, if all states participate, will also
include $3 billion to lower the rates of mortgage holders who are
current. Banks will get more credit for reducing principal owed
and helping families keep their homes, and less for short sales
or taking losses on loans that were likely to go bad, like those
that were severely delinquent.
- Log in to post comments
