Fourteen large banks appear ready to
pony up another $10 billion to end allegations of foreclosure abuse. According to the New York Times, the settlement would end federal investigations
into the bank's purported faulty paperwork and excessive fees.
Unlike the $25 billion settlement
between all but one of the states' attorneys general and some federal agencies
completed earlier this year, the lion's share of the new settlement would go to
homeowners. An estimated $3.75 billion
would be used to compensate those already foreclosed and evicted from their
homes and $2.25 billion would be used to assist other distressed borrowers to stay
in their homes through principal reduction or other loan modifications or by
helping those borrowers to refinance. Under the earlier settlement $1.5 billion was
to be used for cash relief to borrowers and some states have made attempts to
divert their share of that amount into state treasuries.
The Times suggests that one impetus behind the agreement has been the
cost to banks of conducting an independent review of some four million loan
files. The review was mandated by the
Office of Comptroller of the Current and the Federal Reserve in 2011 and required
14 banks to engage consultants to go through files looking for illegally
charged fees, improper use of forced placed insurance rights, and miscalculated
loan payment amounts. The cost of these
reviews has skyrocketed above original estimates with some taking as much as 20
hours of consultant time per file at $250 per hour. There were also hints that the reviews were
not yielding the kind of information the government agencies had sought. The settlement would end these reviews.
Negotiations have proceeded quietly
and, according to the Times, housing
advocates were largely unaware of the discussions. A deal could possibly be by the end of the
week but it is unclear how many current and former homeowners would receive
money or when they would receive it.
The newspaper did not name all of
the banks involved in the negotiations but did say the five who were party to
the $25 billion deal - Wells Fargo,
JPMorgan Chase, Citi, Bank of America, and Ally Bank - are also party to these talks.