Cost of foreclosure settlement rises by $5B

November 01, 2011 03:38PM

The price lenders must pay to move past the federal investigation into their foreclosure practices went up by $5 billion, the Wall Street Journal reported. And it could rise higher.

The ongoing negotiations between government officials and banks, which appeared close to being finalized in September at a cost of $20 billion to the nation’s five largest mortgage servicers, have centered on a new number: $25 billion. The final cost could eventually reach $29 billion.

The lenders in question are Ally Financial, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo.

Banks and government officials, led by the 50 state attorneys general, have yet to come to a conclusion on exactly how much future legal protection a settlement would provide to banks, how the fine would be distributed among the banks and how agreed upon changes to banks’ practices would be monitored.

The $25 billion proposal is comprised of $5 billion in cash penalties, $3 billion worth of refinancings, and billions in principal reduction and aid to homeowners. [WSJ]