Is Foreclosure Processing Deal in its Final Act?

Officials are close to a deal, ending months of negotiations about foreclosure practices.

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The final curtain could soon be coming down on the robo-signing saga, ending a months-long investigation into U.S. banks' foreclosure-processing practices.

State attorneys general and federal officials are "very close" to a settlement with banks involved in the robo-signing scandal, the Wall Street Journal reported Thursday, which would benefit about one million homeowners by reducing the amount they owe on their mortgages.

"It would be a very important step…short of legislation, perhaps the most important step we can take in the short term to help the housing market," Housing and Urban Development Secretary Shaun Donovan said at a conference of U.S. mayors meeting in Washington, D.C. Wednesday.

Foreclosure processing ground to a halt last year after it was discovered mortgage industry employees were signing foreclosure documents without reading them and using fake signatures to keep up with the influx of foreclosure filings.

[Read: Sharp Drop in Foreclosures Last Year But More on the Way.]

Investigations and negotiations have been ongoing for months, but the ultimate settlement could be upwards of $19 billion, according to the Journal, depending on how many states and regional banks sign on to the deal.

When the deal does come through, the housing market is likely to be slammed with another wave of foreclosures as servicers restart proceedings under new guidelines. Much of the foreclosure stock that would have been channeled into the market in 2011 was pushed back, says Daren Blomquist, director of marketing communications at RealtyTrac, which means more will be coming through the pipeline this year.

Still, clarity on foreclosure practices is a good thing, and while it might mean more foreclosures in the short term, in the long run it amounts to ripping off the band-aid quicker, flushing foreclosures through the system and seeing home prices recover sooner.

mhandley@usnews.com

Twitter: @mmhandley

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