Foreclosure settlement gains three more takers
WASHINGTON — Arizona, Michigan and Florida, three of the states hit hardest by the housing crisis, will join a nationwide settlement over foreclosure abuses, sources said Tuesday. They will join more than 40 other states in a deal that would benefit many Americans who lost homes or can’t afford their mortgages.
The three states’ involvement buoys hopes that a full 50-state deal is imminent. Five major states — California, Delaware, Massachusetts, New York and Nevada — are still considering whether to join the settlement.
Formal announcements from Arizona and Florida could come within a week, according to the sources.
Arizona Attorney General Tom Horne said he first wants to resolve a separate foreclosure-related lawsuit his state filed against Bank of America.
Some Florida officials say they are still in discussions, though others said Florida intends to back the deal. Michigan officials said Tuesday that they will join the settlement. Officials said the state would get $500 million in aid.
The nationwide settlement stems from abuses that occurred after the housing bubble burst. Many companies that process foreclosures failed to verify documents. Some employees signed papers they hadn’t read or used fake signatures to speed foreclosures.
The deal would be the biggest involving a single industry since a 1998 multistate tobacco deal. It would force the five largest mortgage lenders to reduce loans for about 1 million households. The reduced loans would benefit homeowners who are behind on their payments and owe more than their homes are worth.
The lenders would also send checks for about $2,000 to hundreds of thousands of people who lost homes to foreclosure.
California’s backing is particularly crucial. It was among the states hardest hit by the foreclosure crisis.
Homeowners in states that opt out of the deal wouldn’t share in the settlement money. The money available to homeowners could run as high as $25 billion if all states approve the deal.
California still has “significant sticking points,” but they may be settled in the coming days, said officials with direct knowledge of the negotiations. That represents progress from a few weeks ago, when California Attorney General Kamala Harris called the proposed settlement “inadequate.” California officials walked away from the negotiating table altogether in September.
The lenders, Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial, have agreed to the settlement. In settling the charges, the states would not seek further civil action but could pursue criminal investigations.