Forty States Sign On to Foreclosure ‘Robo’ Settlement
After more than a year of negotiations, attorneys general from more than 40 states signed on to a proposed settlement agreement with five of the nation's largest mortgage servicers over “robo-signing” foreclosure processing abuses, according to the lead negotiator, Iowa Attorney General Tom Miller.
“This enables us to move forward into the very final stages of remaining work. Federal and state officials, as well as representatives from the banks, continue to address matters that they must complete before finalizing any settlement,” Miller said in a statement released late Monday.
The deal with Bank of America, Wells Fargo, Citigroup, JPMorgan Chase, and Ally Financial will reportedly total $25 billion. Some $17 billion of that would go toward writing down mortgage principal for an estimated 850,000 troubled borrowers, $3 billion could go toward restitution payments of $1,500 each to borrowers who lost their homes to foreclosure, and the rest could go to state funds for foreclosure relief, according to reports and estimates by Inside Mortgage Finance.
The total could be less, however, if California does not sign on. As of late Monday, officials there said Attorney General Kamala Harris had not agreed to the proposal.
“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. We are closer now than we’ve been before but we’re not there yet,” Harris said in a statement earlier that officials in her office said still stood after Iowa's announcement. California accounts for nearly a quarter of the nation's foreclosures in the latest housing crash.
New York also did not sign on to the deal, according to sources in Attorney General Eric Schneiderman's office. Schneiderman had said he would not sign, but reports earlier in the week suggested he was reconsidering, given his new roll as co-chair of a Justice Department task force to investigate mortgage-related abuses.
Attorneys general from Delaware and Nevada also have reportedly not agreed to the deal. Despite the Feb. 6 deadline, states can still sign on and the expectation is that more will.
So-called robo-signing, where thousands of foreclosure documents are signed by one employee without proper verification, came to light in the fall of 2010. Miller formed the coalition of attorneys general to investigate major bank servicers in October 2010. Allegations of forgery and abuse in the documentation process ground foreclosures nearly to a halt for much of 2011, as servicers reviewed and changed the way they process foreclosure documents. They are just now ramping up again in states where foreclosures are not required to go before a judge, or non-judicial states. In judicial states, foreclosures can now take up to three years.
Miller’s office would give no details as to the agreement, or the states that committed to it.