Certain of the nation's megaservicers have agreed to sign a modified consent order with Federal regulators as part of a first step to inking a final settlement between the industry and 50 state attorneys general, sources familiar with the matter said on Friday.
Federal banking regulators also are a party to the settlement – but as a way to establish servicing standards for mortgage bankers.
As reported by National Mortgage News last week, federal regulators have been trying to push the megaservicers into a settlement by forcing them to sign a consent order, the original version of which was rejected by the industry.
One advisor said the consent order has been modified and that some of the 14 or so servicers being targeted have agreed to sign. "A deal on modifying it was reached yesterday (Thursday)," he said.
The original consent order, as written, would be entered into by a servicer. The document would be a binding legal contract between the servicer and its federal bank regulator. Directors of these institutions would then be responsible for assuring that their banks act as "effective" servicers in regard to foreclosures and loss mitigation practices.
Mortgage bankers met with AG officials this week offering a "counter proposal" on the overall settlement. The industry's proposal, copies of which were given to members of the media on Thursday, includes certain concessions such as an end to 'dual-tracking' but only if a mortgagor submits a complete set of modification documents to the servicer.
The AGs are targeting the industry because of shoddy foreclosure and servicing practices brought to light during the nation's housing correction.
Meanwhile, in a new report, Standard & Poor's said the benefit of settling now will increase industry transparency and "ultimately the efficiency of residential mortgage servicing." But it warned that over the short-term the deal will be costly.
S&P analysts said it will lengthen foreclosure and "resolution" timelines, noting that, "Longer foreclosure timelines historically have resulted in higher loan losses."