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California To Sign Mortgage Settlement, Source Says

SACRAMENTO (CBS / AP) – California and New York have agreed to sign the proposed settlement between U.S. states and the nation’s biggest mortgage lenders over foreclosure abuses, according to a source close to the negotiations.

Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial agreed to the settlement—for an estimated $37 billion as of Wednesday for lowering homeowners’ mortgage principal, refinancing, a reserve account, and checks to homeowners. However, they were seeking releases from further legal liability, which have been one subject of negotiations for the past several days with state attorneys general who wanted to pursue investigations.

Phil Matier: State AG Decides To Negotiate On Foreclosure Settlement

The settlement grants immunity from civil lawsuits brought by the attorneys general against the lenders over narrowly defined “robo-signing” cases.

The source, who was not authorized to disclose the agreement before an announcement expected Thursday or Friday, said other holdout states—Delaware, Massachusetts and Nevada—all have or are imminently expected to also agree.

The source said the agreement will enable authorities to pursue all claims over mortgage-backed securities that collapsed. It lets them use facts from robo-signing claims in securities, insurance and tax fraud cases.

It also preserves the lawsuit filed last week by New York Attorney General Eric Schneiderman that accused some banks of deceit and fraud in using an electronic mortgage registry that allegedly put homeowners at a disadvantage in foreclosures.

Schneiderman’s office declined to comment Wednesday night. New York has some 118,000 “underwater” borrowers whose homes are worth less than their mortgages and would expect to get $136 million as a guaranteed cash payment from the settlement.

California, with more than 2 million underwater borrowers, would get $430 million. Florida would get $350 million and Texas $141 million.

Most states had already backed the nationwide settlement stemming from abuses that occurred after the housing bubble burst. Many companies that process foreclosures failed to verify documents. Some employees signed papers they hadn’t read or used fake signatures to speed foreclosures—an action known as robo-signing.

The deal would be the biggest involving a single industry since a 1998 multistate tobacco deal. It would force the five largest mortgage lenders to reduce loans for about 1 million households. The reduced loans would benefit homeowners who are behind on their payments and owe more than their homes are worth.

The deal includes $2.7 billion in guaranteed cash payments altogether, and estimates of $1.5 billion for payments to victims of wrongful foreclosure, $3 billion from a refinance program and $32.3 billion in homeowner benefits from loan modifications.

(Copyright 2012 by CBS San Francisco. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)

  • Catherine Stuckey

    While I think it’s just that Clifornians received compensation for improper foreclosures, I’m not sure they should get a better deal on their mortgages. They made a deal. If refinancing isn’t available, they should be able to arrange to walk away and take the credit score ding.
    I refrained from buying a house during those crazy days because I could foresee the downturn. But with the downturn, I and thousands of others lost their jobs. We didn’t buy into ridiculous interest rates for houses we couldn’t afford, but we’re still suffering. If those with mortgages are going to get payments from the banks, so should everybody affected by the economic downturn they brought about.

  • ConcordMike

    What about the people who were told by the banks, “You have to quit making payments before the bank will talk to you.” That is outright fraud! I know several people with two different banks who were told this and have lost their homes.

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