National Foreclosure Settlement Still Months Away

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mortgage modificationsClosure for the thousands of homeowners affected by faulty foreclosure proceedings may still be several months away, despite the joint efforts of federal and state agencies, according to HousingWire.

Following a national investigation initiated by the 50 state attorneys general in October, a settlement was proposed in March to set new a code of conduct for mortgage servicers and – more pressingly – redress foreclosed homeowners' claims of wrongful home repossessions and lender malfeasance. The settlement outlines 16 points lenders must satisfy before seeking foreclosure, including a mandated review of all "robo-signed" documents.

But several attorneys have rejected the proposal, leaving the fate of a concerted national probe of mortgage servicers in a state of limbo.
"I'm concerned that what started out as an effort to correct specific practices harmful to
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consumers has morphed into an attempt to fundamentally restructure the mortgage loan industry in the United States," Oklahoma Attorney General Scott Pruitt told Bloomberg.

One of the primary contentions raised by opponents of the federal-state settlement is its mandate to require loan principal reductions to facilitate "more sustainable" modifications. Such measures would force servicers to violate their obligations to mortgage investors, Pruitt said.

On the national front, the Obama administration is ratcheting up its effort to force the nation's largest mortgage servicers to modify mortgages for up to three million underwater homeowners. Harsh penalties are being considered to discourage banks from not complying with new modification guidelines.

The modified mortgages could cost the five largest mortgage servicers as much as $30 billion, according to the Huffington Post.

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