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Here's the mortgage servicing overhaul proposed by the U.S. and states

State and federal officials are demanding that the big mortgage servicing arms of Bank of America, Wells Fargo, Chase, Citigroup and Ally Financial provide troubled borrowers with sworn statements justifying foreclosures before the banks seize the homes.

The justification statements would be similar to the affidavits that banks file with judges in states where foreclosures are handled by the courts. But they also would be required in California and other states that generally don't route foreclosures through the courts.

The requirement is just the first in 27 pages of demands the government has presented to big providers of customer service on home loans. The proposal was first obtained and posted online by the newspaper American Banker.

The proposal was delivered to the mortgage servicers Thursday by attorneys general from all 50 states, along with the U.S. Justice Department, the Department of Housing and Urban Development, the Federal Trade Commission and the Consumer Financial Protection Bureau.

As reported Tuesday in the Los Angeles Times, the proposed changes in how banks modify troubled loans and foreclose are intended as a starting point for negotiations with the banks and are expected to be modified.

The intent is to settle investigations into widespread reports of botched paperwork (including "robo-signed" affidavits), trial modifications strung out endlessly and homes seized when the banks would have come out ahead financially by easing the terms of the loans.

RELATED:

California plans $2-billion program to help distressed homeowners

Federal programs can help homeowners avoid foreclosure

-- E. Scott Reckard

 
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