Limiting Immunity for Banks Key in Foreclosure ‘Robo’ Deal

This coming week may finally see a settlement – as high as $25 billion – between states and the nation’s top lenders over improperly processed foreclosures by hired “robo-signers.”
In the final stretch, immunity for the banks against future legal actions has emerged as a key issue in the talks that have entered a second year.
The deadline for states to decide whether to join the settlement with banks was delayed to Feb. 6 from Feb. 3, according to the office of Iowa Attorney General Tom Miller, who has been leading the talks.
There has been dissention among state officials who argue that the settlement is too lenient on the lenders: Bank of America, JPMorgan Chase & Co., Citigroup, Wells Fargo and Ally Financial.
One potential hurdle to this issue is limiting immunity for the banks from separate and future mortgage litigation, especially actions taken by affected homeowners. Criminal prosecutions against the lenders may also be left on the table.
The biggest dissenter has been California Attorney General Kamala Harris who has walked away from the talks out of concerns that residents of her state won’t receive proper compensation. The settlement might drop to $19 billion from $25 billion if California doesn’t sign on.
Affected homeowners would get principal write-downs or favorable refinancing terms under the proposed settlement.
About 1 million homeowners who are “underwater” on their mortgages – owing more in mortgage principal than the value of their homes — could be eligible for as much as $20,000 in write-downs.
“All I would say is that we are making good progress there,” said U.S. Housing and Urban Development Secretary Shaun Donovan said Wednesday during a White House briefing.  “I think you know that documents have been shared with the attorneys general.  They are making decisions as we speak.  A number of them have already announced support for it and it will be finalized, I would expect, in the coming days.”
The settlement will also likely include an overhaul of mortgage restructuring procedures to help more homeowners avoid foreclosures.
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 $1,800 checks, according to media reports last month.

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