Regulators have told the five biggest US mortgage servicers
to consider paying delinquent borrowers up to $21,000 each
as settlement of the foreclosure crisis.
The Federal Deposit Insurance Corp (FDIC) expects the
industry-wide program to involve the biggest services, led
by Bank of America, paying borrowers as an incentive to
leave their homes. Under the program, banks would pay
borrowers who are more than 90 days behind on mortgage
payment up to $1,000 to seek independent financial advice
and to up to $20,000 in cash as a "fresh start". Borrowers
would have to vacate their homes quickly and leave them
in good condition.
Fannie Mae and Freddie Mac, the government-sponsored
mortgage guarantors and private investors who own mortgage
loans were also mentioned as possible providers of cash. Eligible
borrowers would likely include some, but not all, of the 4.8 million homeowners who are more than 90 days in arrears. Some
officials and bank executives strongly oppose this proposal. Some
banks already pay some borrowers to vacate their homes because
it proves cheaper and quicker than a court-ordered eviction but the payment s are generally much smaller.
The Department of Justice, bank regulators, Treasury and the new Consumer Financial Protection Bureau are among the agencies
trying to come to a settlement with the industry. A combined penalty
of about $20 billion with one idea to use the money to write down the outstanding debt of struggling homeowners. Prospects for a single
mega settlement on the part of the banks raise concerns about
whether the money raised in fines should be used for a writedown.
Stay tuned....
Sheila McKinney
