The nation's attorneys general, the Department of Justice and the U.S. Department of Housing and Urban Development (HUD) are “very close” to finalizing a legal settlement to settle 'robosigning' allegations levied against the nation's dozen or so top-ranked servicers, HUD secretary Shawn Donovan said Wednesday morning.
Speaking at U.S. Mayors Conference in Washington, Donovan said roughly one-million borrowers will receive some type of meaningful principal reduction on their mortgage debt.
“There also are a number of families that would get direct compensation for the harm that has been done to them,” the HUD secretary said.
He noted that “real principal reduction” could help the most needy remain in their homes.
He said the settlement should have a substantial impact on the housing market and allow lenders to loosen their underwriting standards so more homebuyers can obtain mortgage credit.
However, at press time no dollar amount had been attached to the settlement. Last year, an estimate of $25 billion was being offered up on the potential cost to top ranked servicers such as Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial.
Industry advisors have said that the $25 billion figure hit strong resistance in the servicing sector.
Servicers are hopeful that once a deal is finalized it will lift a cloud of uncertainty hanging over the industry since the phrase “robosigning” entered the national lexicon almost two years ago.
“Once this is out of the way the industry can get the lay of the land and move ahead with a lot of things – such as servicing sales and a bunch of things,” one Washington counselor said.