The mounting struggle to decide who bears the brunt of the housing crisis seems to be nearing a tipping point: On Wednesday, five major banks will meet with regulators in Washington, D.C.
On tap is a frank discussion of whether the banks are likely to offer broad reduction in principal payments to borrowers underwater in their homes, according to a report in The Wall Street Journal.
More than 100,000 borrowers already got a deal, according to the paper. Now Bank of America Corp., J.P. Morgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc.'s GMAC unit faced pressure to increase that number.
A group of attorneys general representing all 50 states are pushing for more while the banks are dragging their heels, in part because of the risk that giving an inch could result in giving up miles. The 16 major banks and loan servicers have canceled half of the almost 1.5 million trial modifications they have begun, according to a ProPublica study.
Nevertheless, another 11.1 million households – more than 23 percent of all mortgages – were underwater at the end of 2010, reports CoreLogic. The banks have only begun to tackle the problems ahead, and there is a rising concern that many borrowers will be encouraged to simply stop paying in hopes of getting a better deal.
Meanwhile, the five biggest banks have saved more than $20 billion since the housing crisis began by taking shortcuts in handling their home loans, according to an internal report obtained by The Huffington Post.
Put together by the new consumer watchdog under the Treasury Department, the report is seen as ammo for the state attorneys, who will be seeking penalties between $5 billion and $30 billion on the banks to compensate, reports the website.
The money would be applied to principal reductions, yet the total cost of lowering all outstanding loans comes to $135 billion, the Huffington Post reports.
© 2017 Newsmax Finance. All rights reserved.