The state attorneys general announced last month that they finally reached a settlement with the five largest servicers over improper foreclosure and servicing practices.

Although the final terms of the settlement have yet to be released - in fact, as of press time the deal has yet to be signed - early drafts of the agreement indicate that banks will not be prohibited from accessing private-label MBS trusts to settle the arrangement. The bulk of the settlement cost, approximately $17 billion, will be paid by principal reductions on first- and second-lien mortgages, forbearance modifications and costs to facilitate short sales.

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