US president Barack Obama could announce a deal – the largest multi-state agreement since the 1998 tobacco settlement – in Tuesday’s state of the union address
Dominic Rushe in New York
guardian.co.uk, Monday 23 January 2012 19.27 GMT
The US’s five largest mortgage lenders are close to signing off on a massive settlement over deceptive foreclosure practices that drove people out of their homes, according to government officials.
The price of the settlement has been estimated at between $19bn (£12.2bn) and $25bn and would be the largest multi-state agreement since 1998’s deal with the tobacco companies. On Monday Democrat politicians suggested President Barack Obama could announce a deal later today, when he delivers his state of the union address.
“There seems to be evidence that he may do something,” senator Sherrod Brown told reporters, “and we hope ‘the something’ is launching a wider investigation.”
A settlement would end months of negotiations between state and federal officials and the US’s five largest mortgage firms – Bank of America, JP Morgan Chase, Wells Fargo, Citibank and Ally Financial. It is not expected to include Fannie Mae and Freddie Mac, the government-backed mortgage companies which own about half of US mortgages. The talks centre on the banks’ use of so-called “robo-signing” of foreclosure documents with lenders approving legal documents without proper review, and other questionable practices.
US treasury secretary Timothy Geithner and Shaun Donovan, housing and urban development secretary, are believed to have drawn up a draft agreement between the banks and US states that has now reportedly been sent to state officials for review. Obama has been pushing for a deal that would include all US states. But California, the largest US state, quit the talks last year and it is unclear how many states have now agreed to a deal.
Any agreement is likely to bring greater regulatory scrutiny of the mortgage lending market and make it easier for those at risk of foreclosure to restructure their loans. Roughly 11 million people – one in four US homeowners – owe more than their home is worth.