February 7, 2012 in Business

Foreclosure abuse deal near

Key states closer to approving settlement with lenders
Derek Kravitz Associated Press
 
The proposal

Under the deal, the mortgage principal for about 1 million homeowners would be written down by an average of $20,000. An additional 750,000 Americans would receive about $2,000.

WASHINGTON – California and New York, the key holdouts in a long-awaited settlement over foreclosure abuses, moved closer Monday to backing a deal that would force the five largest mortgage lenders to reduce loans for about 1 million households. And more than 40 U.S. states have agreed to a nationwide settlement.

California still has “significant sticking points,” but they may be settled in the coming days, said officials with direct knowledge of the negotiations. That represents progress from a few weeks ago, when California Attorney General Kamala Harris called the proposed settlement “inadequate.”

“I’m less concerned with the timeline than the details,” Harris said in a statement Monday.

Negotiators worked well into Monday night to see if they could persuade more states to join the settlement, an official said. There is growing optimism that California, New York, Delaware, Nevada and a few others will eventually sign on.

Homeowners in states that opt out of the deal wouldn’t share in the settlement money.

The reduced loans would benefit homeowners who are behind on their payments and owe more than their homes are worth. The lenders would also send checks for about $2,000 to hundreds of thousands of people who lost homes to foreclosure.

The five lenders – Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial – have already agreed to the settlement. In settling the charges, the states would agree not to pursue further investigations against the banks in civil court. The deal would not protect the banks from criminal investigations.

The few states that have resisted the deal have expressed concern that it would limit their ability to take action against the banks for any past wrongdoing that turns up later.

California’s backing is particularly crucial. It was among the states hardest hit by the foreclosure crisis. And it has the most residents “underwater”: They owe more on their loan than their home is worth. Without California’s participation, the money available to homeowners nationally would be about $19 billion rather than $25 billion.

© Copyright 2012 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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