Key states lean toward foreclosure deal

Feb. 6, 2012 at 2:03 PM
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WASHINGTON, Feb. 6 (UPI) -- California and New York appear ready to join in an agreement with national banks to settle widespread foreclosure processing abuses, officials said.

New York Attorney General Eric Scheiderman has said progress is being made on an agreement he was previously reluctant to support, The New York Times reported Monday.

California Attorney General, Kamala Harris was also a holdout. Recently, however, she has changed her tune. "For the past 13 months we have been working for a resolution that brings real relief to the hardest-hit homeowners, is transparent about who benefits, and will ensure accountability," she said in a statement. "We are closer now than we've been before but we're not there yet."

With California joining with the other states, the deal has jumped from a $19 billion package to one worth $25 billion, the Times said.

The argument began with a scandal that erupted in late 2010 surrounding the discovery of several national banks hiring law firms to process foreclosures, with many of these taking shortcuts in paperwork that amounted to cheating homeowners of due process.

Some paperwork was signed so quickly, it was impossible to claim the signer had even read the documents. That practice was known as "robo-signing."

Five of the nation's largest mortgage lenders, Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial are reportedly negotiating for a settlement on the complaints that, at one point, were supported by attorney general offices from all 50 states.

But the negotiations have led to some fragmenting. Some states, such as California, threatened to back out if the agreement limited future lawsuits.

California, for example, reached a deal in 2008 with Countrywide Financial that was supposed to curb lender abuses. In 2011, it reached a deal with lenders that was supposed to clean up the business. But abuses have proven to be hard to exterminate, making the state reluctant to sign away its right to sue in the future, the Times said.

Looking for closure, banks have negotiated to add $3 billion more to the settlement if all 50 states sign on to the deal.

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