In recent news, it now appears as if real progress has been made in the ongoing discussions between the Attorneys General of the individual states and the banking institutions under investigation for faulty foreclosures and mortgage malfeasance. In fact, several sources close to the negotiations have indicated that a deal may be finalized within a month.

Past reports have indicated that the two sides were at loggerheads over the issue of providing additional legal protection to the banks - including Wells Fargo, Ally Financial, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo - against potential state civil lawsuits.

According to sources inside the negotiations (now over a year long), it appears that the Attorneys General are finally relenting and agreeing to promise the following legal protections:

  • Protection against state civil lawsuits involving allegations that these mortgage lenders used "robo-signers" to sign off on foreclosure documents without a proper (and legally required) review
  • Protection against state civil lawsuits involving allegations that these mortgage lenders made legal errors when originating home loans (i.e., approving a mortgage without taking the time to verify a borrower's income, etc.)

Thus far, the Attorneys General have been careful to indicate that they will not be overly generous in negotiations with the banks and that they will be held accountable.

"While I can't discuss the details of our negotiations, I will say that we are negotiating a limited - not a broad - civil liability release. We are discussing additional ways to help homeowners while still holding the banks accountable," said a spokesperson for Iowa Attorney General Tom Miller.

In exchange for the promise to extend legal protections, the banks have purportedly agreed to offer refinancing of underwater mortgages, meaning those mortgages where the actual value of the home is far less than the amount owed on the mortgage.

This concession is rumored to bring the total cost of the settlement to nearly $25 billion.

Experts have indicated that allowing these types of homeowners to refinance could not only provide a much-needed shot in the arm to the U.S. real estate market, but also help end questions about the banks potential legal exposure, thereby stabilizing the price of their shares.

Stay tuned for more from our San Antonio bankruptcy blog ...

Regardless of your financial situation, contact an experienced legal professional to learn more about foreclosure, or your rights under Chapter 7 bankruptcy or Chapter 13 bankruptcy.

This post is for informational purposes only and is not to be construed as legal advice.

(Please note: The firm handles only bankruptcy matters and is not involved in any pending class action lawsuits against banks/mortgage lenders. We take pride in reporting matters that are important to our community.)

Source:

Reuters, "States near foreclosure deal with banks" Oct. 19, 2011