HUD Secretary Shaun Donovan says the $26 billion mortgage settlement deal will be filed in court this week.
WASHINGTON (CNNMoney) -- Final details are due out this week in the $26 billion settlement to help struggling homeowners and settle charges of abusive and negligent foreclosure practices, according to President Obama's housing chief.
The Obama administration made a big announcement nearly three weeks ago, touting that 49 states had agreed on a deal with the five largest banks providing relief to homeowners who were victims of improper foreclosures. The relief would come in the form of principal reductions, mortgage refinancings and small payouts.
But so far, the only details made public have been what officials have said, as well as a few short summaries and fact sheets.
Department of Housing and Urban Development Secretary Shaun Donovan said in a Senate Banking hearing Tuesday that the deal will be filed in court later this week, making all the details public.
Donovan said that the earlier announcement revealed the "significant aspects of the agreement." He suggested that officials have been in minor negotiations with some states about, for example, how they planned to use their piece of the settlement.
He also said that federal officials had been in talks with other banks considering signing on to the deal.
"I would put it more in the dotting I's and crossing T's, rather than in the significant terms of the settlement that are being finalized," Donovan said of the lag between the announcement and release of the actual legal agreements.
The deal between the nation's five largest bank servicers, federal officials and 49 states would settle charges of improper foreclosure practices dating back to 2008. The banks committed $26 billion to help underwater homeowners and compensate those who lost their homes. The banks also agreed to change the way they handle and approve foreclosures.
The deal had been in the works for 16 months. Up to 1 million homeowners could see their principal reduced by up to $20,000, while another 750,000 could be able to refinance loans. Payments up to $2,000 will be made to those who lost their homes to foreclosure over the past three years.
Donovan did clarify a few details at the hearing, which had been omitted during the original announcement. For example, he revealed that banks won a concession concerning second mortgages, which would be written down equally with first mortgages under the settlement.
Banks' reticence to write down second liens played a role in stumping progress of Obama administration housing relief efforts. Usually in a foreclosure, second mortgages or second liens are losses borne entirely by the banks. Banks tend to own second liens, which accompany about half of all mortgages at risk for foreclosure, according to a 2010 Treasury report.
Critics, including author of the Naked Capitalism blog Yves Smith, have said the equal treatment of the liens will benefit banks over investors who tend to own first mortgages.
Bank lobbying groups said they were reluctant to comment on Donovan's comments until the final details are made public.
Donovan said during the hearing that a big benefit of the settlement deal will be its impact spurring banks to reduce the mortgage principal for underwater homeowners who are not part of the settlement.
"We think that the settlement could have a catalytic effect in really demonstrating that principal reduction is positive not just for homeowners and communities, but it is also positive for investors when it's done ... in a way that increases returns to investors," Donovan said.
|What we want Apple to unveil at WWDC|
|Millennials squeezed out of buying a home|
|7 traits the rich have in common|
|Big Data knows you're sick, tired and depressed|
|Your car is a giant computer - and it can be hacked|
|Overnight Avg Rate||Latest||Change||Last Week|
|30 yr fixed||4.17%||4.18%|
|15 yr fixed||3.19%||3.19%|
|30 yr refi||4.18%||4.21%|
|15 yr refi||3.20%||3.22%|
Today's featured rates:
|Latest Report||Next Update|
|Home prices||Aug 28|
|Consumer confidence||Aug 28|
|Manufacturing (ISM)||Sept 4|
|Inflation (CPI)||Sept 14|
|Retail sales||Sept 14|