A settlement over foreclosure practices between the nation's five largest mortgage servicers, federal agencies and the states’ attorneys general will not be reached by next Tuesday.
July 13 is the deadline for the banks to submit plans for improving their servicing standards on loan modifications and foreclosures to the Office of the Comptroller of the Currency (OCC). The deadline was extended by 30 days last month at the request of the Department of Justice, which is coordinating the actions of the states attorneys general and the OCC.
There was a possibility the attorneys general and the OCC would coordinate the settlement and the submission of the action plans as both require banks to adopt more stringent standards for carrying out loan modifications and foreclosures. Whether this happens now depends on whether the DOJ asks for another extension.
“We're making great progress on our settlement talks but we won't be finished by the OCC's deadline of July 13,” said Geoff Greenwood, Communications Director for Iowa Attorney General, Tom Miller. Miller is leading the group of attorneys general.
Greenwood said the two sides are not working under a deadline. For the last few months, press reports have suggested a number of times a settlement was imminent.
A report today by Bloomberg said a settlement between the nation's five largest mortgage servicers and the states attorneys general could be reached by July 13th. The report called the target date “tentative.”
The OCC told CNBC it would be willing to extend the deadline again if it received another request from the DOJ. The DOJ declined comment on whether a second extension will be requested, though a person familiar with the talks said one is unlikely.
A person with knowledge of the talks between the states attorneys general and the servicers JPMorgan , Citigroup , Bank of America , Wells Fargo and Ally Financial , said the two sides are finding common ground on more stringent servicing standards for mortgages. The sticking points include the size of the settlement and "release" issues. These have to do with how the settlement limits further liabilities for servicers as well as the ability of attorneys general to bring new foreclosure cases after the settlement.
A report in the NY Post yesterday erroneously put the potential size of the settlement at $60 billion dollars. The paper corrected the report today.
In an interview with a Rochester NY paper, NY Attorney General Eric Schneiderman put the figure between $20 billion to $25 billion.
As for how those funds would be distributed, a proposed structure would place them in two types of funds. One would be a national fund which would allow banks some discretion on how this money was spent, including allowing principal reduction for some homeowners. The other group would be state funds that would allow the states to use the money for various foreclosure initiatives including mortgage hotlines and mediation.
JPMorgan, Bank of America and Citigroup declined comment. Emails to Wells Fargo seeking comment were not returned.