Principal reduction still possible in AG settlement with mortgage servicers
The coalition of state attorneys general issued a revised settlement offer Friday to mortgage servicers under investigation for faulty foreclosure practices, and principal reduction is still part of the equation. The offer would, among other requirements, set up a monetary fund the banks would pay into, though no number was conveyed to the banks, said Geoff Greenwood, a spokesman for Iowa AG Tom Miller, in an interview with HousingWire Wednesday. The fund would go to various state and federal agencies and would be administered by someone outside of the banks, though details are still being negotiated. The AGs set up a variety of rules for how the money will be disbursed from this fund to families affected by the scandal, including restitution and principal reduction. Reports surfaced earlier this week that the AGs dropped their demands for principal reduction from the initial offer. Greenwood said, while the requirement isn't in the new term sheet, some families could still receive this type of assistance through the fund. "This is a combination of terms and some changes," Greenwood said. "It is not a start-from-scratch document." A source familiar with the negotiations confirmed the banks offered to pay $5 billion as part of the settlement. Greenwood could not comment on what the banks were offering. Last year, major servicing arms at Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC), Citigroup (C), Ally Financial (GJM) and smaller firms paused foreclosure processes to check and correct faulty foreclosure affidavits. These companies signed consent orders with the Office of the Comptroller of the Currency and the Federal Reserve in April, pledging to implement new programs and internal oversight. Greenwood said the negotiations between banks, the AGs and other regulators began in Washington Tuesday and will continue through Thursday. Write to Jon Prior. Follow him on Twitter @JonAPrior.