The nation’s largest banks are being asked to write down the principal on some troubled mortgages as part of a settlement of last year’s robo-signing scandal, major news outlets are reporting.
A 27-page proposal from a coalition of the nation’s 50 state attorneys general, with the backing of several federal agencies, was reportedly sent Thursday to the nation’s largest mortgage servicers, including Bank of America, JP Morgan Chase and Wells Fargo, among others. The proposal appears to outline actions the states and federal agencies want the lenders to take in return for dropping charges related to the scandal.
At the heart of the offer is said to be a proposal that the lenders agree to provide $20 billion in mortgage relief for homeowners at risk of foreclosure, either through principal reductions, loan modifications or a combination of measures. The proposal is also said to include a code of conduct mortgage servicers would have to follow in working with borrowers at risk of foreclosure.
The states and federal agencies are said to be seeking enhanced assistance for about 1.5 million homeowners with mortgage problems. There are presently about 4 million mortgages in some stage of delinquency, with another 2 million in the foreclosure process, according to the Mortgage Bankers Association.
Participating agencies are said to include the Treasury Department, Department of Housing and Urban Development (HUD), the Justice Department, Federal Trade Commission and the newly formed Consumer Financial Protection Bureau.
Negotiations with lenders over the final terms of an agreement are expected to begin next week, although it is not clear how long that might take. Some sources indicated an agreement might be reached fairly quickly.
The robo-signing scandal arose when it was learned that representatives of some of the nation’s largest banks were cutting legal corners in submitting foreclosure claims in order to cope with a flood of thousands of such filings a month. A subsequent federal investigation concluded that the vast majority of the foreclosures involved were justified, although a small number were not.
Even if all the foreclosures were justified, the lenders could still face penalties if it were determined that laws were broken in submitting foreclosure claims. The state attorney generals are taking a major role in crafting the proposed agreement because foreclosure laws are generally under state jurisdiction.
Details of the story were originally reported by the Wall Street Journal, Washington Post and Reuters, among others.
source: mortgageloan.com
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