Leading House Republicans challenged a deal Wednesday that federal and state officials have offered to five big U.S. banks that would change the handling of foreclosures and force lenders to modify more mortgages.
Federal regulators and attorneys general of the 50 states offered the terms to the large banks last week, following extended talks over revelations that the lenders had cut corners and used flawed documents to foreclose on many home borrowers.
Asked about the GOP letter, Treasury, in a statement, said: “The mortgage servicing system we have today is broken, and we should work together to establish a stronger set of standards.”
Under the proposal, which would not need Congress’ approval, lenders could be required to write down the value of their loans to borrowers who owe more than their homes are now worth. They reportedly would be forbidden from starting foreclosure proceedings while a homeowner is trying to modify their mortgage terms, and there would be an independent review if they denied a mortgage modification.
The banks are Bank of America, Citigroup, JPMorgan Chase, Wells Fargo and GMAC, which together have about 6 in 10 U.S. home mortgages.
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