WASHINGTON — California and New York were considering Monday whether to join most other states in backing a long-awaited settlement with banks over foreclosure abuses. The deal would require the five largest mortgage lenders to reduce loans for about 1 million households.
State attorneys general had set a deadline of the end of Monday for states to join the settlement. Homeowners in states that opt out of the deal wouldn’t share in the settlement money.
The reduced loans would benefit homeowners who are behind on their payments and owe more than their homes are worth. The lenders would also send checks for about $2,000 to hundreds of thousands of people who lost homes to foreclosure.
The money available to home owners could run as high as $25 billion if all states approve the deal.
The five lenders — Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial — already have agreed to the settlement. In settling the charges, the states would agree not to pursue further investigations against the banks in civil court. The deal would not protect the banks from criminal investigations.
California’s backing is particularly crucial. It was among the states hardest hit by the foreclosure crisis. And it has the most residents “underwater”: They owe more on their loan than their home is worth. Without California’s participation, the money available to homeowners nationally would be about $19 billion rather than $25 billion.
