US Prepares to Sign Off On Foreclosure Fraud Settlement

JPMorgan Chase and Wells Fargo are two of the
banks involved in the current negotiations. (photo:
New York Magazine)

By Jessica Silver-Greenberg, The New York Times

31 December 12

anking regulators are close to a $10 billion settlement with 14 banks that would end the government's efforts to hold lenders responsible for foreclosure abuses like faulty paperwork and excessive fees that may have led to evictions, according to people with knowledge of the discussions.

Under the settlement, a significant amount of the money, $3.75 billion, would go to people who have already lost their homes, making it potentially more generous to former homeowners than a broad-reaching pact in February between state attorneys general and five large banks. That set aside $1.5 billion in cash relief for Americans.

Most of the relief in both agreements is meant for people who are struggling to stay in their homes and need the banks to reduce their payments or lower the amount of principal they owe.

The $10 billion pact would be the latest in a series of settlements that regulators and law enforcement officials have reached with banks to hold them accountable for their role in the 2008 financial crisis that sent the housing market into the deepest slump since the Great Depression. As of early 2012, four million Americans had been foreclosed upon since the beginning of 2007, and a huge amount of abandoned homes swamped many states, including California, Florida and Arizona.

Federal agencies like the Securities and Exchange Commission and the Justice Department are continuing to pursue the banks for their packaging and sale of troubled mortgage securities that imploded during the financial crisis.

Housing advocates were largely unaware of the latest rounds of secret talks, which have been occurring for roughly a month. But some have criticized the government for not dealing more harshly with bankers in light of their lax standards for making loans and packaging them as investments, as well as their problems with modifying troubled loans and processing foreclosures.

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