Foreclosure settlement to come in a 'matter of weeks,' HUD secretary says
A settlement between a coalition of federal and state agencies and banks over foreclosure practices will come in a “matter of weeks,” Shaun Donovan, secretary of Housing and Urban Development, told the Los Angeles Times.
The attorneys general and the federal regulators began investigating the practices of the big mortgage servicers after it was revealed last year that they commonly foreclosed on homeowners using faulty paperwork.
For months, the coalition of investigators has been in discussions with the nation’s biggest servicers: Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc.
The comments by Donovan, who spoke to reporters and editors at The Times on Thursday, came a day after Bank of America Chief Executive Brian Moynihan said a settlement over foreclosure practices would probably drag on “longer than people will think," according to Reuters.
How much banks should pay for alleged improprieties and how that money should be used has been an issue in the talks. Banks have said they are willing to pay a settlement of $5 billion, according to Bloomberg News, while government officials have pushed for a settlement of as much as $25 billion, according to Times reporting.
Donovan said a $5-billion settlement was “unacceptable” but didn't give a dollar figure that would be acceptable. He added that his office as well as those of other federal agencies and attorneys general had uncovered evidence of a widespread problems in dealing with foreclosures and borrowers in default.
“There were a large number of homeowners who weren’t given the opportunity to stay in their homes,” he said.
[Updated at 6:42 p.m.: A spokesman for Iowa Atty. Gen. Tom Miller, a Democrat who is leading the negotiations for the states, said Miller hoped for a quick settlement but would not confirm a set deadline.
“While we certainly hope we can reach a settlement in a matter of weeks, we don’t know how long it will take,” Geoff Greenwood, the spokesman, said. “We are trying to work through some very complicated issues, and we want to make sure to get it right.”
Greenwood did say that the coalition was looking for a settlement larger than what was offered by the banks and that the amount of the settlement was a significant source of debate.
“We agree that $5 billion is unacceptable,” Greenwood said. “I am not sure I want to characterize it as a main issue; it is definitely a major issue, but there are a number of issues we are still working through.”
Greenwood added that using the settlement to fund principal mortgage write-downs for some troubled borrowers remained “on the table.”
Spokespeople for BofA, Chase, and Wells declined to comment, and representatives for Citi and Ally could not be immediately reached.
The banks have balked at including principal write-downs as part of a settlement. At a meeting last week in Washington, the coalition told the nation's top five mortgage servicers that they could face at least $17 billion in civil lawsuits if a settlement is not reached.
The figure does not include billions of dollars in potential claims from federal agencies. Also at that meeting in Washington, the coalition stepped up pressure on the banks by briefing them with a report prepared by HUD’s Office of the Inspector General, detailing some of the improprieties uncovered by that office’s investigation, according to a person familiar with the report who asked to remain anonymous because the person wasn't authorized to speak publicly about the report.
“Suffice it to say that it is a pretty illustrative report, and if you know what OIG reports are, they look for what went wrong,” the person said.]
-- Alejandro Lazo
Photo: Secretary of Housing and Urban Development Shaun Donovan.
Credit: Department of Housing and Urban Development.