Is a Monster Foreclosure Settlement on the Brink?
We might be about to see a $20 billion foreclosure settlement with the Justice Department, state attorneys general, and big banks (NYSE:XLF). The Administration is also pressing ahead on sweeping new guidelines to overhaul the mortgage lending industry which could be part of the deal, though it does not completely have the buy in of California and New York.
Foreclosure papers which were “rubberstamped”, allegedly pushing many out of their homes are involved in the would-be settlement. The $20 billion under discussion is to be akin to a victim relief fund for mortgage borrowers. Based on government guidelines loan modifications would be given by banks, say Citigroup (NYSE:C) and Bank of America (NYSE:BAC) sources. Action has actually been taken against BofA by the states of Arizona and Nevada according to bank disclosures. Foreclosure fraud class actions against banks continue to flood in, hence the reluctance of states like New York. Prior the $20 billion under discussion the government shut down a federally funded program to assist homeowners with mortgage payments.
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“But the government’s poor administration and stiff qualifying rules plagued the EHLP from the start. This program was enacted as part of the Dodd-Frank financial reform law enacted in July 2010. But it didn’t launch until June, due to strict eligibility requirements, and less than half of the intended 30,000 borrowers got assistance. What happened? Tough income requirements, for one, as the EHLP disqualified people who had landed new jobs after falling behind on their loan payments while being unemployed,” according to Fox Business.