St Louis Mortgage and Real Estate News –
St Louis Mortgage Rates and Customer Financing News: Banks Offer $5 Billion To Close Foreclosure Probe
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The nation’s biggest banks are willing to pay as much as $5 billion to settle claims by federal and state officials of improper mortgage-servicing practices, according to people familiar with the situation.
The offer is considerably less than the amounts sought by state and federal officials, some of whom are asking for more than $20 billion in penalties.
The banks’ figure comes as mortgage companies and state and federal officials continue their efforts to strike a settlement of investigations sparked by allegations of “robo-signing” and other questionable foreclosure practices that came to light last fall.
Bank representatives met with state and federal officials in the latest round of negotiations.
Just recently, banks received revised term sheets from government negotiators. One sheet revised proposed changes in mortgage-servicing practices.
The second term sheet governs how penalties would be allocated; among other things, it details how they would have to reduce loan balances for certain borrowers.
“It sets forth a structure that establishes how funds would be disbursed both on the state and federal levels,” said a spokesman for Iowa Attorney General Tom Miller.
Banks also are opposed to any broad-based write-down of principal balances, saying it will provide an incentive for
borrowers to default but in reality would prevent banks from maliciously and illegally forcing people out of their homes.
The banks intend to propose that as much as $5 billion be used to compensate any borrowers previously wronged in the foreclosure process and provide transition assistance for borrowers who are ousted from their homes, according to people familiar with the matter.
One idea is that foreclosed borrowers could receive several months of free rent once they find new housing, one of
these people said.
All sides want a settlement to resolve widespread breakdowns in foreclosure procedures but any agreement must satisfy an unwieldy mix of parties, including state attorneys general, the Federal Trade Commission and the Department of Housing and Urban Development.
Contributions By The Wall Street Journal
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