Banks won a handful of concessions in the landmark $25 billion settlement of alleged foreclosure abuses, as federal officials struck a balance between their desire to be tough on lenders and the need to provide immediate relief to the housing market.
The mix of remedies in the settlement highlights the central tension behind the protracted discussions: Should the deal be structured primarily to punish banks, or should it use allegations of wrongdoing to pressure banks to provide relief that would keep more borrowers in their homes?
When talks began a year ago, state attorneys general and the Obama administration took the view that investors, and not just homeowners, had been harmed by banks’ missteps in foreclosing on homeowners or granting loan modifications. But those officials have also long argued that reaching a quick settlement that provided borrowers with immediate help would be preferable to litigation that wouldn’t yield benefits for years.
Settlement documents, which could be filed in court as soon as Monday, will detail the formulas governing how banks gain credit for that aid, as well as new standards banks will have to follow when they deal with borrowers who face or go through foreclosure.
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