Servicers, Officials Near Multibillion Foreclosure Settlement (BAC) (C) (JPM) (WFC)

July 6, 2011 8:28 AM EDT
Large mortgage servicers, including Bank of America (NYSE: BAC), JPMorgan (NYSE: JPM), Wells Fargo (NYSE: WFC), Citigroup (NYSE: C), and Ally Financial, among others, may be close to a settlement with federal and state officials over some of the toughest foreclosure issues.

According to the New York Post, the settlement, originally expected to cost about $20 billion, may now reach as much as $60 billion and include a "provision for principal reduction."

Sources suggest the announcement could be made within the next few weeks.

Items included in the settlement would range from restitution to penalties on banks moving forward. One big issue that might be resolved involves robo-signing, or the automatic generation of foreclosure documents without proper procedure being followed.

Fees would be pro-rated based on how much "carnage" was created.

One controversial item includes servicers which contributed to a national fund that may lead to principal reductions. This might encourage those in good standing to go into default in order to lower their own principal payment, causing another mess entirely.

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