Attorneys general appeared close to reaching a massive multistate settlement over faulty foreclosure proceedings Wednesday night, though California and New York remained in negotiations, a person not authorized to speak publicly on the matter said.
If reached, the proposed $25-billion deal would be the largest since the 1998 settlement with the tobacco industry. Much of the settlement is expected to go to people struggling to pay their mortgages.
The settlement negotiations follow revelations in 2010 that the nation’s largest banks allegedly foreclosed on borrowers using improper and potentially illegal means. About $20 billion is expected to go toward helping struggling homeowners, including measures such principal reduction, or the writing down of debt, a refinancing program, cash payments to borrowers and loan modifications.
Another $5 billion would go toward a reserve account for state and federal programs and to individual homeowners themselves harmed by the bank practices.
Gaining California on board would be significant as that would bring the total size of the deal to the expected $25 billion. Monday was the deadline for individual states to either reject or accept a deal, though several key states including California and New York did not sign on then.
The Obama administration has been pushing hard for a settlement among the state attorneys general and the nation's five largest mortgage servicers — Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co.,Citigroup Inc. and Ally Financial Inc. — and certain federal agencies.