Our Rancho Cucamonga foreclosure defense attorneys have written here several times before about the issue of robo-signing and the proposed settlement offered by the states to the largest banks accused of illegal activity. So we were disappointed, although not entirely surprised, to read that the state attorneys general are likely to drop their request for loan modifications that reduce principal in order to come to a settlement agreement. Anonymous sources gave that information to reporters, according to a May 10 article from Bloomberg News, following a new settlement proposal sent out to banks the week before. The Wall Street Journal's Law Blog reported May 11 that the banks also offered to pay as much as $5 billion, a quarter of the $20 billion proposed by the AGs.
The AGs reportedly sent out revised term sheets last week, modifying its offer to settle their robo-signing investigation and any possible prosecution or lawsuit. The original proposal included demands for banks to stop illegal robo-signing practices and obey other laws; acknowledge receipt of documents by specific deadlines; stop dual-tracked foreclosures and more. It also included a separate demand for $20 billion in principal reductions to homeowners, which consumer advocates say are the most reliable way to avoid re-defaults after loan modifications. That provision met with predictable opposition from the banks as well as several attorneys general, all Republicans. They argued that writing down principal would encourage more people to default and was so costly for banks that the banks would prefer to foreclose.
The terms of the new proposal are not yet public. Bloomberg said no financial payment number was named, while the Journal named $5 billion as the banks' preference. Bloomberg said principal write-downs could still happen, but for smaller groups of people than originally proposed. It also said some money could go to compensate people wrongly foreclosed, a much smaller group than all of those who could benefit from principal write-downs. Anonymous sources said a final deal could take months. However, Bloomberg noted, banks have already been in touch with several individual attorneys general to lobby for their preferences, in what Bloomberg called a divide-and-conquer strategy.
As Orange foreclosure defense lawyers, we're disappointed by this news. We knew the principal reduction would be controversial, especially among the Republican attorneys general the banks are trying to woo, but it's worth keeping in mind that the banks are in these talks because they broke the law. By knowingly robo-signing and rushing foreclosures through without even bothering to check their documentation, they put all of those homeowners at risk of a wrongful foreclosure. That more than a handful of such people haven't come forward is nothing but luck. Just as importantly, every robo-signed document is perjury and a basis to challenge the foreclosure's validity. These are not behaviors that should be rewarded with friendly negotiations aimed at protecting banks' profits. If the settlement is not adequate, banks should be treated like any other entity that committed a crime and face legal action.
At Howard Law PC, we represent victims of robo-signing and other illegal, unfair practices by lenders. Our clients are people who are fighting foreclosures they believe could have been avoided if the lender had given them adequate consideration. After more than two years of HAMP and other loan modification programs, it's clear that loan servicers frequently don't modify loans because they don't want to -- they stand to make more money from foreclosure and late fees, since they don't own the loans themselves. Thus, loan servicers have every incentive to intentionally delay loan workouts or deny them for spurious reasons. Our Bellflower foreclosure defense attorneys help clients sue the servicer for failure to follow HAMP rules, California law or other applicable regulations. Not only does this get your case before a fair, impartial judge, but it can stop a foreclosure right away if necessary.
If you're heading for foreclosure and you're tired of fighting your loan servicer for attention, call Howard Law instead. For a free, confidential case evaluation, send us an email or call toll-free at 1-800-872-5925.