Feb. 8 (Bloomberg) -- A multistate settlement with five large U.S. banks over foreclosure practices would include as much as $17 billion in mortgage debt forgiveness and loan modifications and take three years to complete, according to a letter describing the deal.
The draft letter to stakeholders from state attorneys general outlines an agreement among large mortgage servicers, states and the Department of Justice, which are continuing talks to finalize the proposal.
Servicers, including Bank of America Corp., JPMorgan Chase & Co., and Wells Fargo & Co., would also have to provide as much as $3 billion in refinancings, enabling borrowers to secure new loans “at today’s historically low rates,” according to the letter.
Another $1.5 billion would be distributed to about 750,000 borrowers who have lost their homes to foreclosure, according to the letter.
States that sign on to the agreement would get “immediate payments” to fund consumer protection and foreclosure prevention efforts.
All 50 states announced almost 16 months ago they were investigating bank foreclosure practices following disclosures that faulty documents were being used to seize homes. Officials from a group of state attorneys general offices and federal agencies, including the Justice Department, have since negotiated terms of a proposed settlement with the nation’s largest mortgage servicers.
The agreement holds banks accountable for “wrongdoing on robo-signing and mortgage servicing.” It allows state and federal prosecutors to continue to pursue securities cases and other claims. Individuals would not be barred from filing their own lawsuits, and the settlement includes “absolutely no criminal immunity for any individual who violated the law.”
Loans owned by Fannie Mae and Freddie Mac are not affected by the settlement, according to the letter.
The letter, fashioned as a template for individual attorneys general to customize, was obtained from a person with knowledge of the talks and its authenticity was confirmed by a second person with knowledge of the talks.
According to the letter, the agreement would give states oversight of national banks for the first time. Banks would be required to report to an independent monitor who reports to attorneys general.
California Attorney General Kamala Harris and New York Attorney General Eric Schneiderman were among attorneys general who had yet to join the accord as of a Feb. 6 deadline. More than 40 states have signed on, said Iowa Attorney General Tom Miller, who is helping to lead talks with the banks.
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