Raw 'Robo' Deal? New Terms, Some Cash for Foreclosure Victims

A settlement between state authorities and five top U.S. lenders over sloppy or wrongfully processed foreclosures will include an overhaul of industry practices – a first since the housing market collapsed four years ago.
But the victims of the “robo-signing” scandal that sparked the multistate foreclosure probe by state attorneys general are likely to get $1,800 checks each under a draft settlement, according to a report by the Associated Press today.
Borrowers who lost their homes to foreclosure are unlikely to get their homes back or reap much financially from the $25 billion settlement. About 750,000 Americans would be eligible for the $1,800 checks.
Some state attorneys general and lawmakers are balking at the proposed settlement for not going after big banks more forcefully.
“We’re urging the Obama administration to stand with homeowners to fight for meaningful settlement,” Sen. Sherrod Brown, D-Ohio told reporters. “No one is above the law.”
The agreement would provide roughly 1 million homeowners a mortgage modification of some sort, including new refinancing terms and principal write-downs for borrowers who are “underwater,” or owe more than the value of their homes.
Mortgage lending guidelines would be eased as well for other homeowners that are not involved directly in the “robo-signing” investigation. Those changes reportedly will ease barriers for restructuring loans for those facing foreclosure.
Iowa Attorney General Tom Miller said in a statement that a deal with the five biggest U.S. mortgage servicers – Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial (formerly GMAC) ­– won’t be reached this week. Miller leads the 50-state bipartisan working group helping coordinate the questionable foreclosure practices.
The lenders are accused of submitting foreclosure documents without verification, or with false representation, or signing certain legal documents outside the presence of a notary public. Authorities say these practices may violate state laws and court rules.
Despite various reports of progress in the talks with the lenders, there is also discontent among some state leaders.
Delaware Attorney General Beau Biden, a Democrat, won’t agree to the proposed foreclosure settlement as currently drafted, Deputy Attorney General Ian McConnel told Bloomberg in a phone interview today.
The settlement amount would drop to about $19 billion if California Attorney General Kamala Harris refuses to sign on, Bloomberg reported.
In September, California Attorney General Kamala Harris backed away from the nationwide foreclosure probe, stating that residents of her state were not being offered sufficient relief.
Massachusetts Attorney General Martha Coakley opted to sue the five banks, charging them with deceptive loan servicing and pursuing illegal foreclosures on properties within that state.
The settlement applies to privately held mortgages, not those held by government-controlled Fannie Mae or Freddie Mac.

One thought on “Raw 'Robo' Deal? New Terms, Some Cash for Foreclosure Victims

  • January 24, 2012 at 8:30 pm

    There are obvious short-falls with the settlement agreement, but they’re arguing over the right issues.

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