Chillin' out till it needs to be funded
Banks are close to a single unified settlement with multiple US State Attorney Genrals valued at $25 bln when last heard. The new settlement will give states the power to go to court to enforce the terms of the settlement that will allow them to fine the banks upto $5 mln for a violation. As already discussed, the firms will be including favorable foreclosure terms as part of the deal with states, cutting mortgage burden by upto $20,000 each ont he revised mortgage to be signed
Current foreclosure options take mortgage custoemrs on a longer ride, rationalising the instalment to a 40 year term or even more on their outstanding mortgage, increasing interest costs by up to 50% over the current bill, but presumably allowing them to pay the revised instalments
The favors by the banks on individual mortgages have been granted to overcome resistance from states asking for higher settlement monies. California, one of the hardest it by the housing crisis, may upset the apple cart if it does not join the settlement as the settlement value will fall drastically from the $25 bln. As of now, Oregon has acccepted that it will join the settlement. North Carolina’s banking commisioner Joseph Smith is likely to be appointed the monitor on the deal
Obama’s “New Deal” independently offers a $8bln to $10 bln package to support refinancing of existing mortgages queued for foreclosure
Mortgage servicers will get detailed covenants in the settlement with the SAGs, including express disapproval of robosigning and
newly set up internal quality units at banks’ mortgage servicing units will monitor compliance with the terms and submit quarterly reports about servicing complaints First uncured violations would be fined $1 mln and second offences $5 mln
Joseph Smith, the banking commissioner in North Carolina, is expected to serve as the monitor on the settlement, people familiar with the matter told Reuters on Monday.
In exchange for up to $25 billion, much in the form of cutting mortgage debt for distressed homeowners, the banks will resolve state and federal lawsuits about servicing misconduct and faulty foreclosures, and some lawsuits about how they made the loans.(Reuters)
California Attorney General Kamakla Harris was however feeling shortchanged by the deal including JP Morgan, Bank Am, Citi and Ally Financial
A high $17 bln of the $25 bln settlement ( depending on which states join) was initially suspected to pay for the $20,000 cut in Prinicipal outstanding while 750,000 borrowers are likely to be compensated less than $2000 for use of improper foreclosure practices as of a week ago.
The $17 bln would have included $7 bln for refinancing and short sales allowing borrowers to close sales for lower than the loan amount due giving them a reprieve from making further payments
Another $4 bln odd would fund state and federal housing initiatives
The Financial Crimes Unit promising further investigations have also put banks on alert instead of pushing this settlement as the be all and end all of the housing crisis