(Reuters)-a controversial weapons to deploy in the United States is to the state and top bank in the treatment of the abuse of more than mortgage dispute the housing crisis near struggle-cutting homeowners mortgage debt owed.
Five big Banks may be required to submit some $1.5 billion, and to reduce the principal balance for struggling homeowners and modified in the other aspects of the loans, according to the proposed deal, in order to solve the "ROBO-signed" scandal charges.
This amount will be more extensive sanctions, total 25 billion us dollars, Wall Street giant, but the potential sow a new method to solve the housing crisis seed small change one part.
Reconciliation talks to continue with the bank, the state's attorney general and redeem shortcuts and other abusive behavior, some of the federal agencies. Trade can be reached within a month, according to people familiar with the matter.
The exact language of the most have not yet been hashing, but it can provide the extensive use of the first major write-downs, some economists and housing advocates say is a fierce, but need steps, to help build the correct housing market.
Investors and the government control of the mortgage finance giants fannie mae and Freddie Mac (Freddie Mac)-all the American mortgage loans-about half the idea of long-term boycott.
Some people worry that it will encourage some borrowers to stop payment, in order to have a qualification in reducing their overall mortgage.
The beauty and the real estate room beautiful regulators already allows major reduce wariness, doing this will reduce the taxpayer support of the value of assets the company holds.
The more extensive outrage, more than the depth of their debts, the possibility of the relief for owner is regarded as the conservative tea party movement of one of origin.
Due to the political sensitivity, Obama government has come through careful help owners. It wants to let more borrowers to refinance, lower interest rates and put out loans, to reduce monthly payment terms.
In the fed's some officials said the central bank should buy more mortgage debt, in order to reduce borrowing rate.
But, these efforts will not help solve the basic problem, many borrowers owe more than their home is worth.
According to a potential solution, five Banks-bank of America, jpmorgan chase, citigroup, Wells Fargo, and ally financial-must meet the goal of dollars, to reduce the principal of the loan of underwater.
"I think this will be a right direction step of the way," said IRA Rhine gold ", the protection of consumer rights and interests of the association executive director." In the AGS hope this can serve as a pilot scheme, and display the main reduction may be how they work. "
To be sure, the influence of the decrease of the limited. This agreement is not possible touch fannie mae and Freddie MAC, the mortgage loans held. According to the time of the envelope calculation, the dollar loan 50000 yuan, reduce the $1.5 billion could reach about 300000 borrowers, a small part of the underwater 110000 homeowners.
But the deal may have prompted Banks expand limited to reduce the principal, and so they only in its portfolio to the greatest risk of loan programs.
Solve laid the foundations, for the more extensive plan, if fannie mae and Freddie MAC is moved on the test as an alternative for rejection of the struggle of borrowers costly process.
"One billion five hundred million dollars (us) is a drop in the bucket, but Ken Johnson said," here are likely to be very chance of experiment, in the Florida international university business school professor.
Previous efforts to
A model may be 2008, across the country, in this year, bank of America to buy mortgage bank and the state's attorney general of reconciliation between. It provides a framework for loan modification, be the government's home affordable modification plan and, so far, only on the basis of moderate impact.
This agreement is established extensive use of "waterfall" practice, try to reduce a borrower monthly payment through a series of steps, including lower interest rates, extend loan time limit and put off some of the main.
The country want to solve for abuse may have similar ripple effect.
Not all countries are very satisfied, bank of America's compliance with the 2008 settlement, indicating that any new resolve in of possible concerns. Nevada and Arizona sued the bank said, it does not have to perform its obligations, and engaged in "hang sheep head sell vinegar" practice in dealing with distressed loan.
Deep Preston, spokesman for the California's attorney general, said his office will continue to receive signals from Countrywide borrowers complaints.
But Massachusetts, said last year from bank of America extraction of extra commitment to reduce some of the most dangerous of all over the country about 300 million loan principal, the bank has to abide by the settlement.
State attorney general's office, brad fugu, the spokesman said, about 2600 people have received loan modification to solve, save $1.25 million mortgage, which includes the principal reduction and other types of changes.
Bank of America said it has expanded 49000 with the national underwater loan principal, in order to reduce, exempt from the principal pay nearly $3 billion since the agreement,.
The settlements, and Wells Fargo similar directly in the most dangerous loans and stay in touch to a great extent on the traditional mortgage loan, still deep underwater housing prices due to shrinkage.
Wells said, it provides 96000 change since the completion of the acquisition of al bank part of main reduce 400 million dollars. In addition, since 2010, wales had attended in HAMP main cut plan.
"We have never before in here, so we can watch the past experience," Johnson said, business school professor, and the market price of the check for increased complexity ", some main reduce may be in the form of the answer."




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