States, including NY and CA, push to include assistance for underwater loans
The latest settlement proposal between the states’ coalition and five major banks after 11 months of talks includes financing support for underwater loans, including refinancing, principal write downs and other forms of assistance. According to CoreLogic, about 22.5 percent of all residential mortgages are underwater.
Multistate talks to craft a settlement with the major banks stalled a few weeks ago when California State Attorney General Kamala Harris withdrew. Harris pointed to the combination of the banks’ demands for broader immunity from litigation and penalty for their earlier “abuses” along with the inadequate relief proposed for homeowners whose loans are underwater as unacceptable to protect the interests of California and California homeowners.
Earlier this month, Harris stated that she thinks the head of Fannie Mae and Freddie Mac should “step aside” if he will not approve principal reduction for underwater loans. PICO, a California community organizing network, pointed out in a press release that Fannie and Freddie “continue to keep more than one million California families trapped in unsustainable debt.”
The talks, led by Iowa State Attorney General Tom Miller and supported by the Obama administration, had recently increased the suggested penalties from $20 billion to $25 billion. The additional $5 billion, paid directly to state and federal governments, is intended for eligible victims of the five participating banks’ foreclosure processes — restitution payments are estimated to be between $1,500 and $2,000.
In addition to Harris, attorneys general from several other states including New York, Massachusetts, Nevada, Minnesota, Kentucky and Delaware have stated that they don’t feel that the proposed $25 billion settlement is adequate to protect their states’ homeowners.
Gathered from the following sources:
- California Pulls Out of Foreclosure Talks (WSJ)
- States near foreclosure deal with banks (Reuters)
- Kamala Harris, California Attorney General, To Fannie And Freddie Head: 'Step Aside' Over Mortgage Crisis (Huffington Post)
- Should Fannie, Freddie Write Down ‘Underwater’ Mortgages? (WSJ Blogs)