Efforts to reach a coordinated settlement with mortgage servicers over alleged "robo-signing" foreclosure practices are still in the preliminary stages, with federal regulators, state attorneys general still hashing out the size and scope of any deal with banks.

Negotiators who are reportedly pushing for a $20 billion legal settlement that would help mortgage lenders put the robo-signing controversy behind them have set off a debate over whether that amount is too large or small, and how money from any settlement would be used.

As many as 14 loans servicers could be parties to any settlement of allegations that they took shortcuts in preparing documents used in foreclosure proceedings, the Wall Street Journal reported Thursday. Although some federal regulators and state attorneys general support a $20 billion settlement, the proposal hasn’t been presented to loan servicers, the Journal reported.

Also to be decided is whether loan servicers would pay civil fines, provide principal reductions for loan modifications, or some combination of both.

Efforts to reach a coordinated settlement with mortgage servicers over alleged "robo-signing" foreclosure practices are still in the preliminary stages, with federal regulators, state attorneys general still hashing out the size and scope of any deal with banks.

Negotiators who are reportedly pushing for a $20 billion legal settlement that would help mortgage lenders put the robo-signing controversy behind them have set off a debate over whether that amount is too large or small, and how money from any settlement would be used.

As many as 14 loans servicers could be parties to any settlement of allegations that they took shortcuts in preparing documents used in foreclosure proceedings, the Wall Street Journal reported Thursday. Although some federal regulators and state attorneys general support a $20 billion settlement, the proposal hasn’t been presented to loan servicers, the Journal reported.

Also to be decided is whether loan servicers would pay civil fines, provide principal reductions for loan modifications, or some combination of both.

Reuters reported today that while federal bank regulators are hoping to present at least the outline of a settlement by mid-March, they have not yet reached agreement among themselves.

Regulators with the Federal Deposit Insurance Corp. and the Treasury Department support a settlement on the order of about $20 billion, Reuters said. The Office of the Comptroller of the Currency supports a smaller settlement, and the Federal Reserve "appears to be somewhere in the middle," Reuters said, citing anonymous sources.

State attorneys general are conducting their own robo-signing investigation, led by Iowa Attorney General Tom Miller.

Although Miller has said the states hope to work with federal agencies to reach a coordinated settlement with loan servicers, he told Reuters that it’s possible the settlement being hammered out now may not apply the same language to all parties, including the attorneys general.

When controversy over foreclosure practices erupted last fall, foreclosure-related filings dropped below the 300,000-per-month mark in November for the first time in nearly two years, according to statistics compiled by RealtyTrac.

A robo-signing settlement could clear the way for a resurgence in bank repossessions and foreclosure sales, particularly in 23 judicial foreclosure states where courts typically oversee the process.

RealtyTrac statistics show foreclosure filings had already picked up again in January in nonjudicial foreclosure states that have been least affected by the crisis.

Last week, OCC acting director John Walsh testified before a congressional panel that an investigation by federal bank regulators found "critical deficiencies and shortcomings" in loan servicers’ foreclosure practices,  but uncovered only a small number of foreclosure sales that shouldn’t have gone through.

Federal regulators looked at procedures employed by the 149 largest mortgage servicers during the fourth quarter of 2010, and reviewed 2,800 foreclosures at various stages in the process.

Rep. Maxine Waters, D-Calif., who is a senior member of the House Financial Services Committee, issued a statement today calling a $20 billion settlement too small.

"Though this figure sounds like a large settlement to those unfamiliar with the scale of the foreclosure crisis, we must remember that over 3 million homes have been lost to foreclosure since 2006, and some analysts expect an additional 11 million foreclosure filings in the near future," Waters said.

Given what she had learned about servicer-driven defaults in the years since the foreclosure crisis began, Waters said she was "doubtful" of Walsh’s claim that only a small number of borrowers were improperly foreclosed on.

"I remain concerned that our regulators didn’t learn the lessons outlined in the Financial Crisis Inquiry Commission report, which starkly laid out how a failure to protect borrowers led to an explosion in exploitative subprime mortgage products," Waters said. "All the evidence we have points to the fact that history is likely repeating itself."

Waters said any settlement should also address future mortgage servicing standards, and that she plans to reintroduce a bill that would place new requirements on loan servicers.

The bill, HR 3451, would require lenders to structure compensation to loan servicer so that servicers have an interest in a loan remaining current, and to separate transaction processing from loss mitigation. Servicers would also be required to foreclose in their own names, and disclose the complete chain of title.

Federal banking regulators are conducting separate investigations of MERSCORP and its subsidiary, Mortgage Electronic Registration Systems Inc. (MERS), which tracks servicing rights and ownership interests in mortgages in an electronic registry. The MERS registry allows loans to be bought and sold without recording transfers with county recorders, a practice lawyers for delinquent borrowers have challenged.

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