New York, California expected to sign off on $37 billion foreclosure settlement

A multibillion-dollar settlement moved closer to completion on Wednesday as two holdout states agreed to sign a proposed $37 billion settlement with the nation's largest banks over questionable foreclosure practices. 

New York and California will join the agreement worked out between states' attorneys general and Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial, according to news reports on Wednesday night. 

A final agreement, expected Thursday or Friday, would cover costs of reducing homeowners' mortgage principal, refinancing and payments to homeowners affected by foreclosure abuses. 

The deal includes $3 billion for refinancing loans and $32.3 billion for loan modifications, along with $2.7 billion in guaranteed cash payments and about $1.5 billion for homeowners who went through wrongful foreclosure.

President Obama and congressional Democrats are pushing for a more thorough investigation into banks' foreclosure practices, while banks, during the past few days of talks, have been negotiating to remove themselves from further legal liability from investigations by states' attorneys general. 

Under the settlement, banks would have immunity from civil lawsuits brought by the attorneys general over "robo-signing" — when lenders signed off on foreclosure paperwork without thoroughly reviewing files, the main reason why banks came under scrutiny and halted or slowed the rate of repossessions about 18 months ago. 

Delaware, Massachusetts and Nevada — all states undecided about whether to join the settlement — also were expected to sign onto the deal.

Authorities will still be able to investigate claims regarding mortgage-backed securities that collapsed, and a lawsuit filed by New York Attorney General Eric Schneiderman last week is still in play. The suit accuses some banks of defrauding homeowners going through foreclosure. 

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