Obama mortgage pact: new effort to save mortgage marketTopic: Mortgage
The Obama administration is trying to push a settlement that could force the largest U.S. banks to pay for reductions in loan principal worth billions of dollars following breakdowns in mortgage servicing, The Wall Street Journal said.
Should a settlement be reached, some state attorneys general are also pushing for banks to pay more than $20 billion of civil fines or to fund a similar amount of loan modifications for troubled borrowers, the newspaper said on Wednesday, citing people familiar with the matter.
Regulators are looking to settle with as many as 14 servicers, including three of the nation's four largest banks: Bank of America Corp (NYSE:BAC - News), JPMorgan Chase & Co (NYSE:JPM - News) and Wells Fargo & Co (NYSE:WFC - News), the newspaper said, citing people familiar with the matter.
The administration wants a commitment from loan servicers to reduce loan balances for borrowers who owe more than their homes are worth, and that such costs would not be borne by investors who bought mortgage-backed securities, the newspaper said, citing people familiar with the matter.
It would thus force servicers that mishandled foreclosure procedures to bear losses by writing down loans they service on behalf of clients such as Fannie Mae (OTC BB:FNMA.htm">FNMA.OB - News), Freddie Mac (OTC BB:FMCC.OB - News) and other investors, the newspaper said.
A settlement would let banks devise their own modifications or use existing government programs, and require them to reduce second-lien mortgages when primary mortgages are modified, the newspaper said, citing people familiar with the matter.
Terms remain fluid and have not been presented to banks, the newspaper said, citing people familiar with the matter.
Bank of America, JPMorgan and Wells Fargo declined to comment to the newspaper. None could be immediately reached after-hours for comment.