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Servicing

More than 40 states to sign foreclosure settlement

More than 40 states will sign a settlement with the top five mortgage servicers over alleged foreclosure abuses that arose more than one year ago, Iowa Attorney General Tom Miller said in a statement Monday night.

Last week, Miller extended the deadline to Monday for states wanting to sign the deal with Bank of America (BAC), Wells Fargo (WFC), Citigroup (C), JPMorgan Chase (JPM) and Ally Financial (GJM).

"The sign-on deadline for the proposed joint state-federal mortgage servicing settlement passed Monday with more than 40 states signing on," Miller said "This enables us to move forward into the very final stages of remaining work. Federal and state officials, as well as representatives from the banks, continue to address matters that they must complete before finalizing any settlement."

Throughout the day, those representing states hardest hit by the foreclosure crisis signaled they are still working on the details of the settlement.

"We're closer," a spokesperson for California AG Kamala Harris said.

"My office is continuing to review the intricate draft settlement terms and advocating for improvements to address Nevada's needs," said Nevada AG Catherine Cortez Masto in a statement. "Receipt of important state specific information is necessary to make our determination and my office is still in discussions regarding that information."

Florida AG Pam Bondi said she "remains involved in the settlement discussions in order to reach the best resolution for Floridians and all Americans." She signed a joint letter with other republican AGs in 2010, saying a settlement that would involve principal reduction creates a moral hazard and lead to more strategic defaults.

A spokesman for Arizona AG Tom Horne said he would decide sometime later Monday.

More than 796,000 homes in these four states received at least one foreclosure filing in 2011, according to RealtyTrac, accounting for more than 42% of all activity in the country.

Oregon AG John Kroger and Connecticut AG George Jepsen said publicly they would sign onto a deal.

"I helped to negotiate and strongly support the bipartisan multistate foreclosure settlement," Jepsen said in a statement last week. "It would provide timely help to thousands of Connecticut homeowners when they can still use that help to save their homes. It would impose tough new servicing standards on banks and hold them accountable for what have become familiar abuses such as lost documents, poor communication, inadequate and poorly trained staff, and endless loan modifications."

Jepsen said the deal would allow his office to go after illegal practices the banks committed leading up to the crisis, which is a central point for many AGs wanting to join a federal mortgage fraud task force announced last week.

New York AG Eric Schneiderman, who will co-chair the task force with the Justice Department, also said previously he would not sign onto the foreclosure deal, but reports surfaced this week he was considering signing on. He was removed from the central negotiation committee last year when he tried to expand the scope of the investigation into securitization and other issues. His task force will look into secondary market fraud outside of the robo-signing probe.

Miller formed the multistate coalition in October 2010 to look into faulty foreclosure documents signed en masse and allegedly forged. Since then, a settlement has been almost perpetually imminent. Last week, when many of these AGs had stated they would not sign on, the total charged to the servicers was around $25 billion.

The Department of Housing and Urban Development said Wednesday that $17 billion will be used for principal reductions. Between $2 billion and $3 billion will be used for housing counseling and legal aid.

An official in one AG office said an announcement is expected at the end of this week at the earliest.

jprior@housingwire.com

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