California calls mortgage settlement “inadequate”

WASHINGTON (AP) — California officials are refusing to sign a proposed settlement between U.S. states and the nation’s biggest mortgage lenders over deceptive foreclosure practices, calling it “inadequate.”

The objection raised by the nation’s biggest state delivered a major setback to the deal, which promised to help roughly 1 million homeowners see the size of their mortgage reduced by an average of $20,000.

Five major banks — Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial —have agreed to the settlement, which was sent around Monday for state officials to review.

California Attorney General Kamala D. Harris says the deal as written would limit her ability to bring civil charges against mortgage lenders that wrongfully foreclosed on homeowners. Harris, who is a Democrat, objected to an earlier version of the settlement in September.

“We’ve reviewed the details of the latest settlement proposal from the banks, and we believe it is inadequate for California,” said Shum Preston, a spokesman for Harris.

Those who lost their homes to foreclosure are unlikely to get their homes back or benefit much financially from the settlement, which could be as high as $25 billion. About 750,000 Americans — about half of the households who might be eligible for assistance under the deal — could receive checks for about $1,800.

But the agreement could reshape long-standing mortgage lending guidelines and make it easier for those at risk of foreclosure to restructure their loans.

Nearly 8 million Americans have faced foreclosure since the housing bubble burst. In some cases, companies that process mortgages failed to verify the information on foreclosure documents. The worst practices, known collectively as “robo-signing,” included employees signing documents they hadn’t read or using fake signatures to sign off on foreclosures.

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