“A proposed $25 billion settlement between five big banks, state attorneys general and the Obama administration may help resolve some of the thornier legal issues surrounding the mortgage mess that caused the housing market to collapse.
It will do relatively little to stop the ongoing wave of home foreclosures or revive the deeply depressed housing market, however.
Talks got underway more than a year ago after a series of private lawsuits focused national attention on an outbreak of “robo-signing” and other shoddy and fraudulent document processing practices by mortgage servicers foreclosing on homes. Most of the key issues that have sidelined past tentative agreements have been addressed, according to a source close to the talks who was not authorized to discuss the proposal.
But a final agreement could still be weeks away. Iowa Attorney General Tom Miller said Monday that some terms still have to be resolved. He made clear that the parties still have significant work ahead of them.
“We have not yet reached an agreement with the nation’s five largest servicers, and we won’t reach a settlement any time this week,” he said in a statement.
The deal would require banks to devote roughly $17 billion of the total settlement to various types of loan modifications for homeowners. Rather than paying that amount in cash, lenders would receive a series of credit toward that amount based on a complex formula that would assign different levels of credit to different types of modifications. Decisions about which loans to modify would be left to bankers.”
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