In a recent development, some of the top US mortgage servicers, including JP Morgan and Bank of America, have decided to pay $5 billion so that they can settle the ongoing foreclosure probe by the state and the federal government against them.
Why was this probe initiated?
The probe was initiated in all the 50 states due to the faulty foreclosure practices after the collapse in the real estate market. Most of the lenders and mortgage servicers violated state laws while foreclosing properties.
What is the new proposal all about?
In the proposal, a fund will be established, which will, in part pay for principal write downs. This fund will be administered by state and federal officials. This fund could help repay the borrowers whose homes were improperly foreclosed by the banks.
Why was this proposal made?
The State Attorney Generals and the Federal officials, during a settlement talk, offered to revise settlement terms and proposed this option to the banks so that they could fund principal write-downs for homeowners.