For well over a year, the Attorneys General of the 50 states and several major banks have been involved in settlement negotiations concerning widespread abuses in the mortgage industry and fraudulent foreclosure practices. Now, it appears that these negotiations may finally be drawing to a close.

According to several people with close ties to the talks, the Attorneys General have finally agreed to extend more protection against state civil lawsuits to the banks implicated in the scandal, including Wells Fargo, JPMorgan Chase & Co., Bank of America, Ally Financial and Citigroup.

Specifically, these banks will likely be granted legal protection from state civil lawsuits concerning foreclosures that relied upon faulty procedures (i.e., improper document review, falsified signatures and use of "robo-signers") and errors made during the loan origination process.

What then did the Attorneys General get in exchange for offering this greater legal protection to these banks/mortgage lenders?

According to inside sources, the banks agreed to refinance the mortgages of homeowners who have not fallen behind on their payments, but whose homes are now worth far less than the amount of their mortgage (i.e., those Americans with underwater mortgages).

This concession could bring the potential settlement amount paid by the banks close to $25 billion (up from an estimated $20 billion, the majority of which was likely to go toward settling federal claims) and even help stimulate the slumping real estate market.

Still, the Attorneys General - well aware of the rumors concerning the negotiations - have already gone on the record as saying they will not be overly generous in their dealings with the banks.

"While I can't discuss the details of our negotiations, I will say that we are negotiating a limited - not a broad - civil liability release. We are discussing additional ways to help homeowners while still holding the banks accountable," said a spokesperson for Iowa Attorney General Tom Miller, one of the leaders of the settlement negotiations.

Stay tuned for further developments from our Phoenix bankruptcy blog ...

If you are facing foreclosure, you should strongly consider contacting an experienced bankruptcy attorney to learn more about your rights and your options under Chapter 13 bankruptcy.

This post is for informational purposes only and is not to be construed as legal advice.

Source:

Reuters, "States near foreclosure deal with banks" Oct. 19, 2011