For months now a nationwide plan to help homeowners hit by the mortgage meltdown and improper foreclosure practices may be announced today under a multi-state settlement by states’ attorneys generals and the nation’s five major lenders (Bank of America, JP Morgan Chase, Wells Fargo, Citigroup and Ally Financial) This past Monday was the actual deadline which was the latest extension, but key states such as California and New York still have not agreed to the terms.
The plan anticipates that about $17 billion is expected to go toward direct relief to borrowers in the form of principal reductions, or write-downs of mortgage debt or loan modifications assistance. An additional $3 billion would go towards assisting homeowners to refinance. $5 billion would go toward a reserve account for state and federal programs and to individual homeowners harmed by bank practices.
California and New York, two instrumental states, were close to signing the agreement Wednesday night though there are still points being discussed and finalized. Full details are not available and it would not be surprising if there is further delay due to the extent and details necessary of the program. Negotiations have been in the works for more than a year with several extensions, the most recent one extended talks to this past Monday. As many as 1 million homeowners could receive mortgage aid through the proposed deal, according to the Department of Housing and Urban Development.
California’s concerns is that the deal would release lenders from legal action. This includes violations of state laws for issues that had not been thoroughly investigated which is related to losses sustained by the California Public Employees’ Retirement System. This is the nation’s largest public pension fund.
California Atty. Gen. Kamala D. Harris left negotiations this past Sept stating that the banks weren’t providing enough money for California homeowners and were asking for too much legal forgiveness.
Once California stepped away, the release from legal claims for lenders was broadened to include issues related to the origination of mortgages. Harris wants to retain the ability to get restitution for such claims, particularly regarding predatory lending.
In New York, Atty. Gen. Eric Schneiderman’s recent lawsuit against three of the banks in the discussions – Bank of America, Wells Fargo and Chase, has complicated negotiations. Allegedly, the banks’ use of an electronic database has resulted in fraudulent foreclosure practices. Furthermore, a foreclosure settlement could prevent further investigations into mortgage misdeeds of Wall Street prior to the meltdown.