A few days ago, it looked like a done deal, but California appears to have thrown a monkeywrench into the tentative agreement between states’ attorneys general and five major lenders over questionable foreclosure-processing practices.
Newspapers in that state reported that Attorney-General Kamela D. Harris considers the $25 billion proposed settlement inadequate. In October, Harris had pulled out of talks to hammer out such an agreement, concerned that the accord would keep individual homeowners from pursuing complaints against the lenders involved (she launched a mortgage fraud task force in May 2011).
California has had more foreclosures than any state since the housing bubble burst in 2006-2007, so what Harris says may determine the future of the agreement.
Other attorneys general also are reportedly not happy with the tentative accord, according to Twitter and blog posts.
Foreclosures are handled by the states. In September 2011, it came to light that thousands of foreclosure documents allegedly had been signed but not read by lenders and servicers before being submitted to authorities.
Eventually, attorneys general in every states began investigations, then decided to conduct a joint probe.
Under the proposed settlement, Bank of America, Wells Fargo, JPMorgan Chase, Citibank and Ally agreed to provide up to $25 billion for principal reductions averaging $20,000 for one million borrowers, plus payments of $1,800 to others harmed by deceptive lending practices.
Some states are suing these banks for a variety of reasons related to the foreclosure crisis. The settlement, if accepted, might determine whether those lawsuits are pursued.