State attorneys general and federal banking regulators are reportedly closing ranks in their efforts to reach a settlement with mortgage lenders over alleged shortcomings in procedures employed by loan servicers in foreclosing on borrowers and considering them for loan modifications.

The nation’s biggest mortgage services received a proposal from state attorneys general and federal regulators last week that outlines formulas they would be required to use when considering borrowers for loan modifications, the Wall Street Journal reported, citing anonymous sources.

If accepted by lenders, the formulas would force them to offer more borrowers principal write-downs, the Journal said, which are considered to be more effective in preventing foreclosure than lowering a borrower’s interest rate or extending the loan term.

Anonymous sources told the Washington Post that government negotiators have set a goal of reaching a settlement that prevents 1.5 million new foreclosures.

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