Government settlement with financial industry over foreclosure practices draws near
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Discussion PolicyBy Brady Dennis
Washington Post Staff WriterThursday, February 24, 2011; 12:18 AM
State and federal officials, who have been negotiating with financial firms over how to address widespread abuses in foreclosure practices, are moving closer to a settlement that could force banks to reduce the principal on mortgages for some borrowers who owe more than their homes are worth.
An official familiar with discussions between the government and the financial industry said the settlement also could require that banks increase their efforts to modify mortgages for distressed borrowers and pay penalties that could be used as restitution for homeowners who have wrongfully faced foreclosure.
"State attorneys general are working closely with a number of federal agencies on a potential settlement," Geoff Greenwood, a spokesman for Iowa Attorney General Tom Miller (D), who is leading a 50-state investigation of the foreclosure mess, said in an interview Wednesday. He added, "We haven't finalized anything, and we're still working on some very complicated issues."
For months, the state officials have been conducting separate negotiations with a handful of firms, such as Bank of America and J.P. Morgan Chase, and pressing them to accept similar terms. Officials said the talks have been complex because each firm's situation is different. Moreover, multiple state attorneys general and nearly a dozen federal agencies are involved in the discussions.
"We're all trying to work to find some common ground," Greenwood said.
The core group of attorneys general heading up the foreclosure effort has been debating the best course of action - both among themselves and with their federal counterparts - even as sensitive talks with bank executives over the final details of the agreements continue.
State attorneys general, the Obama administration and independent federal regulators have been conducting several parallel inquiries into the nationwide foreclosure breakdown for months.
Since last May, the Federal Housing Administration has been investigating why large mortgage companies have not modified the loans of borrowers who are struggling to pay them. These firms are required by law to make such modifications because the loans are guaranteed by the FHA, which promotes lending to first-time home buyers. The FHA has found that some major mortgage lenders have not followed the law in their modification programs but the agency has not named the lenders publicly.
In addition, a task force involving the Justice Department and Securities and Exchange Commission is examining the potential for fraud in how banks have seized homes from borrowers facing foreclosures, and in how mortgage companies and banks have disclosed to investors details of foreclosure options.
"State attorneys general are working closely with a number of federal agencies on a potential settlement," Geoff Greenwood, a spokesman for Iowa Attorney General Tom Miller (D), who is leading a 50-state investigation of the foreclosure mess, said in an interview Wednesday. He added, "We haven't finalized anything, and we're still working on some very complicated issues."
For months, the state officials have been conducting separate negotiations with a handful of firms, such as Bank of America and J.P. Morgan Chase, and pressing them to accept similar terms. Officials said the talks have been complex because each firm's situation is different. Moreover, multiple state attorneys general and nearly a dozen federal agencies are involved in the discussions.
"We're all trying to work to find some common ground," Greenwood said.
State attorneys general, the Obama administration and independent federal regulators have been conducting several parallel inquiries into the nationwide foreclosure breakdown for months.
Since last May, the Federal Housing Administration has been investigating why large mortgage companies have not modified the loans of borrowers who are struggling to pay them. These firms are required by law to make such modifications because the loans are guaranteed by the FHA, which promotes lending to first-time home buyers. The FHA has found that some major mortgage lenders have not followed the law in their modification programs but the agency has not named the lenders publicly.
In addition, a task force involving the Justice Department and Securities and Exchange Commission is examining the potential for fraud in how banks have seized homes from borrowers facing foreclosures, and in how mortgage companies and banks have disclosed to investors details of foreclosure options.
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